French train manufacturer Alstom has confirmed it’s discussing the possible purchase of the train unit of Canada’s Bombardier, a potential $7 billion deal that could help it construct scale in the more and more competitive rail industry.
A deal might be vital for Alstom, manufacturer of the TGV bullet trains, which velocity between French cities equivalent to Paris and Nice because it seems to be competing with China’s CRRC, the world’s largest train manufacturer.
Alstom was obstructed in 2019 by European regulators from merging with Germany’s Siemens.
A source conversant in the matter had told Reuters Sunday that Alstom was close to agreeing to buy Bombardier’s practice business in a deal giving the unit value of $7 billion on an enterprise foundation combining equity and debt.
Train manufacturers are eyeing consolidation to cut back costs by means of scale and improve skinny rolling stock margins as they face competitors from CRRC.
An Alstom purchase of Bombardier Transportation, which is HQ in Berlin and which has factories globally including at Derby in the English midlands and Mannheim in Germany, would doubtless attract antitrust scrutiny. However, some analysts have stated there may very well be less of a regulatory barrier to a deal since the pair has a lower European share in high-speed rail and signaling.
The French authorities, which had criticized the EU’s rejection of the Siemens merger, are looking on the deal with Bombardier with a favorable eye and expect less EU resistance.