German industrial group Siemens and French rival Alstom confirmed to merge their rail operations last week. The joint venture is to be named Siemens Alstom. Fifty per cent will be owned by Siemens and Alstom will supply the chief executive: Henri Poupart-Lafarge.

Last week, it became clear that the two rival companies were in negotiations regarding a possible merger, while similar talks with the Canadian company Bombardier were stranded a month earlier. A deal with Bombardier was still likely, as the relation between Siemens and Alstom had been strained in past years, some sources close to the company had said.

European competitor

The merger is seen as an attempt to counter the competition of China’s state-backed CRRC, which is larger than Siemens, Alstom and Bombardier together. The joint venture is considered a successful example of European cooperation and a strong competitor in the rail industry for the long term.

The companies combined have sales of 15.3 billion Euros and earnings before interest and tax of 1.2 billion Euros. It has a combined staff of 62,300 employees, an eleven-member Board of Directors and targets synergies of 470 million Euros in four years at the latest after closing of the deal, which is expected at the end of 2018. A standstill at 50.5 per cent of Alstom’s share capital applies in the same four-year period.

Transport business

Transport businesses of the companies include signaling and rail technology, and span the iconic French TGV and German ICE high-speed trains. The companies said their operations were largely complementary, with Alstom present in growth markets in the Middle East and Africa, India, and Central and South America, while Siemens was strong in China, the United States and Russia.

The global headquarters, rolling stock business and stock-market listing of the new entity will be in Paris and the signaling and technology business in Berlin.