French multinational rail company Alstom - the maker of TGV trains - and German industrial giant Siemens have agreed to join forces and create a “European champion in mobility”. A memorandum of understanding for the merger of Siemens’ Mobility business, including its Rail Traction Drives business, with Alstom was signed on the 26th of September.
This deal opens up discussions which space from business to the economic and political impact this merger will have on Europe and on our globalized world as a whole. Indeed, this Franco-German deal matters a lot for the economy as well as for the politics of the two European countries as it will change the dynamics of the global fast-growing transportation sector.
The deal
Siemens AG President and CEO Joe Kaeser called the transaction, which is expected to be concluded by the end of 2018, a “FrancoGerman merger of equals”.
The new entity Siemens Alstom, hiring 62,300 employees in over 60 countries, will be listed in France and will have global headquarters in Paris. On the other hand, headquarters for the Mobility Solutions business will be located in Berlin. Siemens will contribute its Mobility business in return for newly issued Alstom’s shares representing 50% of capital. Alstom CEO Henri PoupartLafarge will stay as CEO of the new entity. The new board will host 6 directors designated by Siemens, 4 independent directors and the CEO.
The combined company’s revenues amount to €15.3 billion, with adjusted EBIT of €1.2 billion. It has also been agreed that Alstom shareholders will receive two special dividends: a control premium of €4.00 per share and an extraordinary dividend. Siemens will get warrants to acquire Alstom shares up to 2% of capital that can be exercised starting from 4 years after closing.
Synergies
The merger is expected to generate annual synergies of €470 million, thanks to the strategic and operational value which will be created by the two players’ collaboration. The two giants of the railway market are indeed complementary when it comes to operations and geographic presence. First of all, Alstom has activities in Middle East, Africa, India and South America, while Siemens is present in China, in the US and Russia. Global reach and enriched expertise will allow the group to enhance the production portfolio in terms of innovativeness and efficiency. Investment in digital services will increase and, last but not least, competition from the Chinese CRRC Corp. will be better faced.
This is why, according to Siemens and Alstom, the winners of the merger will not only be the two companies, but all people as they will benefit from smarter solutions and enhanced mobility systems. Henri PoupartLafarge, Chairman and CEO of Alstom, recently said: “I am particularly proud to lead the creation of such a group which will undoubtedly shape the future of mobility.”
More sceptical commentators consider the fact that the two companies’ activities have significant overlap in Europe (mostly in Germany) which could lead to asset sales and possible job cuts.
An integrated industry…
The mobility market is growing globally and there is a consolidation trend in the industry due to the need to face globalisation and digitalisation. In a phase when National Champions are losing primacy and power, a European Champion seems to be the best way to withstand the growth of China’s CRRC Corp Ltd.: the state-owned Chinese rolling stock manufacturer committed to constant innovation, currently working to produce the fastest train ever made.
…in a disintegrated Europe?
While nationalistic stances spread widely in Europe, the merger of the two continental giants stands out like a unifying force. Siemens CEO Joe Kaeser said “This Franco-German merger of equals sends (…) 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”. According to him, the new company will send a political message as it would strengthen Europe's “technological ecosystem” and provide “wellpaying jobs in times marked by populism, nationalism and “selfcentred leadership”.
If businesses understand that European production must be defended by the creation of European champions, capable of withstanding a fierce global competition, will this need for cooperation be felt by institutions and politicians too?
This deal opens up discussions which space from business to the economic and political impact this merger will have on Europe and on our globalized world as a whole. Indeed, this Franco-German deal matters a lot for the economy as well as for the politics of the two European countries as it will change the dynamics of the global fast-growing transportation sector.
The deal
Siemens AG President and CEO Joe Kaeser called the transaction, which is expected to be concluded by the end of 2018, a “FrancoGerman merger of equals”.
The new entity Siemens Alstom, hiring 62,300 employees in over 60 countries, will be listed in France and will have global headquarters in Paris. On the other hand, headquarters for the Mobility Solutions business will be located in Berlin. Siemens will contribute its Mobility business in return for newly issued Alstom’s shares representing 50% of capital. Alstom CEO Henri PoupartLafarge will stay as CEO of the new entity. The new board will host 6 directors designated by Siemens, 4 independent directors and the CEO.
The combined company’s revenues amount to €15.3 billion, with adjusted EBIT of €1.2 billion. It has also been agreed that Alstom shareholders will receive two special dividends: a control premium of €4.00 per share and an extraordinary dividend. Siemens will get warrants to acquire Alstom shares up to 2% of capital that can be exercised starting from 4 years after closing.
Synergies
The merger is expected to generate annual synergies of €470 million, thanks to the strategic and operational value which will be created by the two players’ collaboration. The two giants of the railway market are indeed complementary when it comes to operations and geographic presence. First of all, Alstom has activities in Middle East, Africa, India and South America, while Siemens is present in China, in the US and Russia. Global reach and enriched expertise will allow the group to enhance the production portfolio in terms of innovativeness and efficiency. Investment in digital services will increase and, last but not least, competition from the Chinese CRRC Corp. will be better faced.
This is why, according to Siemens and Alstom, the winners of the merger will not only be the two companies, but all people as they will benefit from smarter solutions and enhanced mobility systems. Henri PoupartLafarge, Chairman and CEO of Alstom, recently said: “I am particularly proud to lead the creation of such a group which will undoubtedly shape the future of mobility.”
More sceptical commentators consider the fact that the two companies’ activities have significant overlap in Europe (mostly in Germany) which could lead to asset sales and possible job cuts.
An integrated industry…
The mobility market is growing globally and there is a consolidation trend in the industry due to the need to face globalisation and digitalisation. In a phase when National Champions are losing primacy and power, a European Champion seems to be the best way to withstand the growth of China’s CRRC Corp Ltd.: the state-owned Chinese rolling stock manufacturer committed to constant innovation, currently working to produce the fastest train ever made.
…in a disintegrated Europe?
While nationalistic stances spread widely in Europe, the merger of the two continental giants stands out like a unifying force. Siemens CEO Joe Kaeser said “This Franco-German merger of equals sends (…) 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”. According to him, the new company will send a political message as it would strengthen Europe's “technological ecosystem” and provide “wellpaying jobs in times marked by populism, nationalism and “selfcentred leadership”.
If businesses understand that European production must be defended by the creation of European champions, capable of withstanding a fierce global competition, will this need for cooperation be felt by institutions and politicians too?