Bid to Create European Train Champion on Verge of Collapse
January 17 2019 - 11:23AM
Dow Jones News
By Ruth Bender and Valentina Pop
BERLIN -- A mooted Franco-German rail merger that has been
hanging in the balance for months appeared to be on the verge of
collapse Thursday after people close to the talks said antitrust
regulators and the companies behind the deal had reached an impasse
in talks.
The European Commission, the European Union's competition law
enforcer, was expected to block the merger between the train-making
operations of France's Alstom SA and Germany's Siemens AG if there
aren't fresh concessions by the companies to allay its concerns
that the deal would harm competition, European officials said.
But a person familiar with the negotiations said industrial
conglomerate Siemens wouldn't submit new proposals after deciding
these would defeat the deal's economic rationale.
"If the commission refuses, we can't do the deal," said the
person. "We've pushed this to the edge."
A commission spokesman declined to comment on the coming
decision and said the investigation was still ongoing. Alstom Chief
Executive Henri Poupart-Lafarge said on a conference call Thursday
that the company believed the proposed remedy package was adequate
to address the concerns of the commission. He declined to comment
on details of the talks with the Commission.
A collapse of the deal would mark a defeat for advocates who
have been calling for a European train champion able to counter
growing competition from China, on the model of aerospace giant
Airbus SE.
Alstom, maker of French high-speed train TGV, and Siemens, which
makes the high-speed ICE trains, had pitched the merger of their
rail operations as a necessity to compete in the future with
Chinese rail giant CCRC Corp., the world's largest rail
supplier.
But opposition to the deal had grown louder in recent weeks.
Competition commissioner Margrethe Vestager has repeatedly
warned that the combination would hinder competition in Europe on
the market for trains and signaling systems. Several national
competition authorities, including Germany's own Bundeskartellamt,
have raised objections to the merger, along with railway
associations and trade unions in France.
Backers of the deal, both in France and Germany, have warned
that blocking the deal would be a strategic mistake.
"A refusal from the European Commission would be an economic and
a political mistake," French government spokesman Benjamin Griveaux
said at a weekly press conference Wednesday.
Germany's influential BDI industry lobby Thursday also warned
that the deal's demise would raise doubts about the prospects of
European leaders emerging in other critical areas. BDI President
Dieter Kempf said that besides Siemens and Alstom, only the Chinese
were competing in the market for ultra-high-speed trains. "I will
leave it up to your fantasy to imagine what might happen if the
Franco-German merger doesn't go through."
At a closed-door meeting of all 28 EU commissioners on Tuesday,
Ms. Vestager laid out her objections to the merger and faced no
objections from her colleagues, according to people familiar with
the discussion, suggesting she had cleared all internal hurdles to
block the merger. The decision is expected by Feb. 18.
Siemens is ready to consider alternative options for its rail
business if the deal is blocked, including an initial public
offering of its Siemens Mobility business, the person familiar with
the company said. Mr. Poupart-Lafarge said Alstom wasn't working on
a plan B but was focused entirely on plan A.
"Everything is known and on the table, now it's time to make a
decision, " he said.
--Olaf Ridder contributed to this article.
Write to Ruth Bender at Ruth.Bender@wsj.com and Valentina Pop at
valentina.pop@wsj.com
(END) Dow Jones Newswires
January 17, 2019 11:08 ET (16:08 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.