Germany’s Siemens and Canada’s Bombardier in rail operations merger talks

Germany's Siemens and Canada's Bombardier were in discussions regarding combining their rail operations, Reuters today reported citing two people close to the matter. The move is seen as a bid to join forces against Chinese state-backed market leader CRRC Corp.

The joint venture would create a company with $16 billion worth of combined sales amounting to half those of CRRC. France's Alstom would be out of the consolidation move.

The last few years have seen consolidation of players in the industry as global companies sought to contain costs.

Bombardier, Siemens and Alstom had talked about combining their businesses in various arrangements over the past years. According to one of the people this would be the third attempt by Siemens and Bombardier to combine forces.

One of the sources said the talks were on and had already gone far; he however asked not to be named as the negotiations were confidential.

Shares of Siemens had risen to a record € 129.80 on an earlier report of the talks by Bloomberg, but the stock later slipped back. Bombardier shares were up 6.7 per cent to 2.37 Canadian dollars.

Analysts, however, say the antitrust concerns in Europe remained the biggest threat to a deal. Also a deal would also face opposition from unions in the run-up to Germany's fall elections, they point out.

According to commentators, the deal would have impact beyond the respective companies' home markets of Canada and Germany respectively.

Bombardier's rail unit has a workforce 3,500 strong in the UK and its trains are in use by operators including Greater Anglia, Scotrail and in London.

Siemens train workers in the UK number 700 and its contracts included supplying Eurostar trains. Also its high-speed trains were in use by operators across Europe.

BBC reported RBC analyst Walter Spracklin as saying although details were lacking, he viewed a combination of the two positively.