Germany's electronics giant Siemens and the maker of France's high-speed TGV trains, Alstom, signed an agreement on Friday that will see the creation of a European company to rival China's market-leading state-owned rail giant.
The accord sets the conditions for combining Alstom with Siemens Mobility, the German firm's rail and infrastructure division.
"We have reached an important milestone on the way to building a new leader capable of tackling the challenges of tomorrow's mobility," said Henri Poupart-Lafarge, the chief executive of Alstom, who will be the new company's CEO.
Plans for the partnership were first revealed in the autumn and will see the new firm gain access to the German corporation's patents.
Ahead of Friday's signing, Siemens Chief Executive Joe Kaeser told a French newspaper that the new firm "will not be a sub-division of Siemens."
"Siemens Alstom will be a French company, with its headquarters in France, listed on the French stock market and with a very competent French boss," he told Le Figaro.
The two rail groups have combined sales of €15.3 billion ($18 billion) and earnings before interest and tax of €1.2 billion. China's CRRC, on the other hand, has annual revenue of about €28 billion.
Read more: The Siemens-Alstom deal: A closer look
Siemens will control 50 percent of Alstom immediately, but will be blocked from taking a bigger than 50.5 percent stake for the next four years.
The merger is still subject to approval by competition authorities in several countries, while France's labor unions — which fear job cuts and closures — have threatened to block the deal. Alstom employs 32,800 people worldwide. Siemens Mobility has 28,800 staff members.
An Alstom-Siemens coupling has been mooted for years and completes the transformation of the French group. Alstom sold off its energy business to American rival General Electric in 2015 for €9.5 billion.
The merger, which is expected to be completed by the end of the year, will create the world's top firm for rail signalization and the No. 2 for building train carriages.
The deal comes amid rising competition from CRRC, which until recently focused mostly on its domestic market, but is now chasing deals across Europe.
On Thursday, France's Economy and Finance Minister Bruno Le Maire confirmed that the national rail operator SNCF would place an order for 100 next-generation TGVs with Alstom within the next three months.
mm/sms (AFP, dpa)