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Bombardier’s rail unit, known as Bombardier Transportation, is based in Berlin. Pension fund manager Caisse de dépôt et placement du Québec owns a roughly 32.5-per-cent stake in the business.DENIS BALIBOUSE/Reuters

Bombardier Inc. is said to be exploring a tie-up of its rail business with France’s Alstom SA, rekindling efforts to find a merger partner after a failed proposal with Germany’s Siemens AG two years ago.

Montreal-based Bombardier and Alstom have held preliminary talks about a rail deal in the past few months, Bloomberg News reported Tuesday, citing people it did not identify. The news service said deliberations started before the Canadian manufacturer’s latest profit warning.

Bombardier declined to comment.

The plane and train maker last week slashed its financial estimates for 2019 again on the back of continuing struggles with its train business and said it may pull out of a joint venture with Airbus SE, undermining investor confidence in management and shredding its market capitalization by about one-third to $3-billion. The company also said it was “actively pursuing options” to strengthen its balance sheet and “solve” its capital structure.

The effort to combine its rail operations with another major competitor “has always been on the table for the last number of years,” Veritas Investment Research analyst Dan Fong said. “They have never ruled anything out.”

But striking a rail deal now appears more urgent than ever to help stabilize its pool of assets, which also includes a business that makes private jets. The company was pushed to the brink of collapse in 2015 under the weight of heavy investments in new aircraft and it is faltering again now as trouble completing a handful of rail contracts is burning cash.

Bombardier’s rail unit, known as Bombardier Transportation, is based in Berlin. Pension fund manager Caisse de dépôt et placement du Québec owns a roughly 32.5-per-cent stake in the business.

Bombardier proposed a train tie-up with Siemens that was considered but rejected by the German company’s board in September 2017 in favour of a merger with Alstom. That deal was blocked by European Commission regulators.

Any new merger of European rail titans is also expected to face close anti-trust scrutiny, even as France and Germany push for more flexibility.

The probability of success for a Bombardier-Alstom tie-up is better than the failed Siemens-Alstom deal, Bank of Nova Scotia analyst Konark Gupta said. That’s because Bombardier and Alstom likely don’t have as much overlap on high-speed trains and signalling systems as Alstom-Siemens have, which would make a deal less concerning to EU competition authorities, he said.

Alstom is likely to control Bombardier Transportation in a merger scenario because it is slightly bigger and has been executing better on contracts, Mr. Gupta said in a note.

Bombardier customers may also support the potential merger if they’re worried those execution issues could “spill into more contracts,” he said.

All three European train makers have been circling one another for years amid a growing threat from China’s CRRC Corp.

Bombardier Transportation insiders have said that competition from the new breed of Chinese train giants, which intend to become strong competitors in the European and North American markets, would force industry-wide consolidation among the French, German, Italian and Japanese train companies, a process that has already started. In 2015, Hitachi of Japan bought Italy’s AnsaldoBreda, the maker of Italy’s new generation of Bombardier-engineered high-speed trains.

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