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A hydrogen-powered train built by Alstom arrives at a station in Leipzig, Germany, on Feb. 1, 2019.PETER ENDIG/AFP/Getty Images

Siemens and Alstom’s plan to create a European rail champion collapsed on Wednesday after EU regulators blocked the deal, prompting Germany and France to call for an overhaul of EU competition policy to better meet global challenges.

Berenberg Bank said the failed deal could now put a deal with Alstom’s rival Bombardier in play.

At 13:58 GMT, Alstom’s stock in Paris was up 4 per cent after hitting its highest since Dec. 18, while Siemens shares in Frankfurt were down 0.7 per cent.

Following the news, Berenberg analysts upgraded Alstom to a ’buy’ rating and set a new price target of €42 ($63), noting that Alstom may now seek an alternative deal with Bombardier’s transportation division.

“In our view, the market has been solely focused on the potential merger with Siemens Mobility ... and is mispricing the fact that Alstom’s earnings could double by 2025,” Berenberg analysts said in a note.

A tie-up with Bombardier’s transportation business – its largest unit by revenue – could be an “interesting alternative that Alstom should explore”, the bank said, estimating it could boost Alstom’s share price to €45.

It would likely have a higher chance of antitrust approval than the Siemens deal because of the lower European market share in high-speed rail and signalling, which was a major obstacle with Brussels, it said.

The European Commission also rejected a bid by German copper company Wieland-Werke AG to buy a business unit from Aurubis, Europe’s biggest copper smelter, similarly arguing the deal could have pushed up prices for consumers.

The Commission’s two vetoes are likely to spur efforts by France and Germany to loosen EU competition rules so as to take a more global than solely European view of mergers and potentially to allow EU ministers to have a say.

Shortly after the Commission’s announcements, German Economy Minister Peter Altmaier said Berlin and Paris were working on a proposal to change European competition rules to facilitate large cross-border mergers.

France’s Alstom said the veto was a clear setback for industry in Europe, while Joe Kaeser, the chief executive of Germany’s Siemens, said Europe urgently needed to reform its industrial policy to help its companies compete.

“Protecting customer interests locally must not mean that Europe cannot be on a level playing field with leading nations like China, the United States and others,” Mr. Kaeser said in a statement.

Proponents of the bloc’s strict merger regime, however, argue such changes could lead to opaque and unpredictable rules. The Commission has approved over 3,000 mergers in the past 10 years and blocked only nine, including those on Wednesday.

EU Competition Commissioner Margrethe Vestager dismissed Siemens and Alstom’s argument about merging to compete with their bigger Chinese state-owned rival CRRC in the European market.

“We don’t see the Chinese coming. The Chinese are nowhere, not at all in Europe,” she told a news conference.

Shares in Siemens were little changed by the announcement, which was widely expected. However, Alstom stock gained more than 4 per cent. Broker Berenberg said the market had been overly focused on the potential benefits of the rail merger, and ignoring that Alstom’s earnings could double by 2025.

Alstom chief executive Henri Poupart-Lafarge told reporters the company was looking into new avenues for expansion, saying future growth would be “more organic”.


Siemens and Alstom had wanted to combine their rail operations to compete more effectively with CRRC globally, backed by the French and German governments, which favour creating industrial champions.

However, Ms. Vestager said she blocked the deal to protect competition in the European railway industry.

“Without sufficient remedies, this merger would have resulted in higher prices for the signalling systems that keep passengers safe and for the next generations of very high-speed trains,” she said.

In the copper case, Ms. Vestager said rolled copper would become even more important in an age of electrical vehicles.

She said the companies in both deals were not willing adequately to address the regulator’s competition concerns and their concessions fell short.

The rail deal also triggered criticism from national competition agencies in Germany, Britain, Spain, Belgium and the Netherlands.

Siemens makes the ICE trains for Deutsche Bahn and also builds units for Channel Tunnel operator Eurostar. Alstom is the manufacturer of France’s signature bullet train, locally known as the TGV. The rolling-stock maker also sells urban and suburban trains as well as signalling systems.

Bombardier welcomed the Commission’s decision.

“It would have severely undermined the health and competitiveness of the whole European rail market, leaving European consumers, both as rail users and tax payers, to pay the price,” said Daniel Desjardins, Bombardier general counsel and company secretary.

Bombardier, which sources say also held talks with Siemens in 2017, would have faced a rival with operations more than double its size in the European market, even though the merged group, in revenue terms, would only have been half the size of CRRC.