News arrived late last night at SmartRail World confirming the long discussed combining of two industry giants, France’s Alstom and Germany’s Siemens in a “merger of equals.” They announced they had signed a Memorandum of Understanding to combine Siemens’ mobility business including its rail traction drives business with Alstom. The company will be listed in France and group headquarters in Paris area; led by Alstom CEO with 50 percent shares of the new entity owned by Siemens, who will receive newly issued shares in the combined company representing 50 percent of Alstom’s share capital on a fully diluted basis. The business headquarters for its Mobility Solutions will be in Germany and for Rolling Stock in France. The two businesses are largely complementary in terms of activities and geographies and their combined company’s revenue €15.3 billion, adjusted EBIT of €1.2 billion. The announcement states that annual synergies of €470 million will be expected within four years of confirming the deal. The corporate name of the combined group will be Siemens Alstom.
Under increasing pressure from Chinese rail, in particular CRRC, there had been reports that Bombardier had also held talks with Siemens. But the announcement that it will be a European tie-up only, leaves them out in the cold and facing furhter challenges this week in a tariffs battle with the USA that threats jobs in Northern Ireland and Canada. This merger helps shore up Siemens and Alstom's position against Chinese growth into markets that have previously dominated.
“This Franco-German merger of equals sends a strong signal in many ways. We put the European idea to work and together with our friends at Alstom, we are creating a new European champion in the rail industry for the long term. This will give our customers around the world a more innovative and more competitive portfolio”, said Joe Kaeser, President and CEO of Siemens AG.
“The global market-place has changed significantly over the last few years. A dominant player in Asia has changed global market dynamics and digitalization will impact the future of mobility. Together, we can offer more choices and will be driving this transformation for our customers, employees and shareholders in a responsible and sustainable way”, Kaeser added.
“Today is a key moment in Alstom’s history, confirming its position as the platform for the rail sector consolidation. Mobility is at the heart of today’s world challenges. Future modes of transportation are bound to be clean and competitive. Thanks to its global reach across all continents, its scale, its technological know-how and its unique positioning on digital transportation, the combination of Alstom and Siemens Mobility will bring to its customers and ultimately to all citizens smarter and more efficient systems to meet mobility challenges of cities and countries. By combining Siemens Mobility’s experienced teams, complementary geographies and innovative expertise with ours, the new entity will create value for customers, employees and shareholders,” said Henri Poupart-Lafarge, Chairman and Chief Executive Officer of Alstom SA. “I am particularly proud to lead the creation of such a group which will undoubtedly shape the future of mobility.”
The new entity will benefit from an order backlog of €61.2 billion, revenue of €15.3 billion, an adjusted EBIT of €1.2 billion and an adjusted EBIT-margin of 8.0 percent, based on information extracted from the last annual financial statements of Alstom and Siemens. In a combined setup, Siemens and Alstom expect to generate annual synergies of €470 million latest in year four post-closing and targets net-cash at closing between €0.5 billion to €1.0 billion. Global headquarters as well as the management team for rolling stock will be located in Paris area and the combined entity will remain listed in France. Headquarters for the Mobility Solutions business will be located in Berlin, Germany. In total, the new entity will have 62,300 employees in over 60 countries.
The businesses of the two companies are largely complementary. The combined entity will offer a significantly increased range of diversified product and solution offerings to meet multi-facetted, customer-specific needs, from cost-efficient mass-market platforms to high-end technologies. The global footprint enables the merged company to access growth markets in Middle East and Africa, India, and Middle and South America where Alstom is present, and China, United States and Russia where Siemens is present.
The Board of Directors of the combined group will consist of 11 members and will be comprised of 6 directors designated by Siemens, one of whichbeing the Chairman, 4 independent directors and the CEO. In order to ensure management continuity, Henri Poupart-Lafarge, will continue to lead the companyas CEO and will be a board member. Jochen Eickholt, CEO of Siemens Mobility,shall assume an important responsibility in the merged entity.
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