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EU blocks Siemens-Alstom merger

February 6, 2019

The EU has rejected a merger between rail giants Siemens Mobility and Alstom, citing "serious" effects on competition. The plan would have seen the creation of a European company to rival China’s CRRC.

Französischer TGV und deutscher ICE
Image: picture-alliance/dpa/imageBROKER

The European Commission on Wednesday announced its decision to block a merger between Siemens Mobility and Alstoma – who produce the long-distance ICE and TGV trains respectively.

The Commission said the takeover, which would have fused the French and German rivals into a new company, breached anti-trust regulations because it "seriously reduced competition."

Read more: The Siemens-Alstom deal: A closer look

European Competition Commissioner Margrethe Vestager addresses the media in Brussels
Vestager said the companies could not address the Commission's anti-trust concerns.Image: Reuters/Y. Herman

"This merger would have resulted in higher prices for the signaling systems that keep passengers safe and for the next generations of very high-speed trains," European Competition Commissioner Margrethe Vestager said.

"The Commission prohibited the merger because the companies were not willing to address our serious competition concerns."

Siemens, Le Maire criticize move

French Economy Minister Bruno Le Maire slammed the decision, calling for reform of the bloc's competition rules.

"It's sadly necessary to look to the future and reform European competition rules. Along with my German counterpart Peter Altmaier, we shall put forward propositions for reforming these rules and and creating a more ambitious European industrial policy," Le Maire said.

Veteran German politician Manfred Weber, who heads the biggest political grouping in the European Parliament, described the decision as "a mistake."

The Commission, whose responsibility it is to assess high-value mergers, began investigating the proposal last July. It says the two companies "were not willing to offer adequate remedies" to address its concerns.

Shortly after the announcement however, Siemens claimed it had proposed "extensive" remedies and regretted that these were insufficient.

Details of the now-defunct deal:

- Creation of a new Siemens-Alstom Group to be headquartered in France

- Alstom CEO Henri Poupart-Lafarge to head the entity

- Siemens to own 50 percent of shares

- Estimated annual turnover of €15.3 billion ($17.4 billion)

- Touted as "European Champion" to rival China's CRRC

The investigation’s findings 

The Commission’s concerns were limited to two main areas: signaling systems and very high-speed trains. For other products in the rail industry, such as metros and most types of trains,it said there was enough competition for the Siemens-Alstom merger not to be a serious issue.

In the rail signaling systems market, Siemens and Alstom are two of the three largest players – the third also being a European company, according to Commissioner Vestager.

"To be clear: it’s fine to be big," she said. "But that’s not the issue here."

"The merged company would have become, by far, the largest player in Europe and in some signaling markets there would be no competition left."

As for the very high-speed trains market, which deals with trains with speeds exceeding 300 kilometers per hour (186 miles per hour), Siemens and Alstom are the two largest players globally outside China, Vestager said.

France's TGV train and Germany's ICE train travelling on a bridge in Kehl
The merger quash competition in Europe, the Commission foundImage: picture-alliance/dpa/M. Murat

Chinese rail dominance

The investigation also addressed concerns Chinese rail behemoth CRRC, which holds about half the world market share, could push players out of Europe. But it found the likelihood of this happening slim.

"No Chinese supplier has ever participated in a signaling tender in Europe or delivered a single very high-speed train outside China," Vestager wrote. "There is no prospect of Chinese entry in the European market in the foreseeable future."

CRRC is a state-controlled corporation. It was formed in 2015 after a merger between the world’s two largest manufacturers of railway vehicles.

But the company’s success can be attributed to its virtual monopoly on rail car production in a country looking to rapidly expand rail infrastructure.

Read more: Sieren's China: Speeding ahead of the rest of the world

CRRC reported $33 billion (€29 billion) in sales last year. In comparison, Alstom had $9.4 billion and Siemens Mobility around $10 billion.

But Vestager says 90 percent of the CRRC’s activities are inside China, and it has "little success" overseas.

nn/msh (AP, AFP)