Two key issues have regularly appeared in business stories featured here at SmartRail World; consolidation between suppliers and the increasing influence and growing market share of Chinese companies, particularly CRRC Corporation. This week a major development has emerged, according a Bloomberg report and Canadian newspaper Globe and Mail – a possible merger between Bombardier Transportation and Siemens Mobility. Although not confirmed by either party, the advantages would likely be to share costs, merge manufacturing facilities and increase competiveness levels against Chinese suppliers. The markets have approved – Bombardier shares gained 4.5 percent to C$2.32, their highest level in a month, after the Bloomberg report was published. Although any deal is likely to be the subject of significant scrutiny of antitrust and regulatory authorities as well as trade unions.
Stories about a merger or purchase between these two (plus at times Alstom) have regularly surfaced in recent years. There has even been talk of Bombardier Transportation merging with a Chinese train company keen to gain an even firmer foothold in Europe. But this tie up between Bombardier Transportation and Siemens Mobility would create a company with joint sales of over £13bn ($16bn, €10bn) and would have global repercussions far beyond the Bombardier and Siemens' home markets of Canada and Germany respectively.
The report from Bloomberg states that analysts from Societe Generale SA have valued Siemens’s mobility unit at about 7.2 billion euros, while Veritas Investment Research Corp. has said Bombardier’s 70 percent stake in its transportation business is worth at least $5 billion. Bombardier sold a 30 percent stake in its Berlin-based train business to fund manager Caisse de Depot et Placement du Quebec last year to help prop up its struggling aviation division. Recent years at Siemens have seen CEO Joe Kaeser narrowing its focus on energy, industrial software and factory automation.
The report in Globe and Mail Canadian Financial Advisers Desjardins analyst Benoit Poirier told journalists he believed a combination of the trains divisions of Bombardier and Siemens would make strategic sense. “Over all, we believe such a combination would benefit [BT] as it would be able to compete more effectively against Chinese competitors who are currently expanding aggressively internationally.”
Both firms declined to comment when contacted by news agencies. SmartRail World will keep you updated on developments.
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