The merger would help Alstom to compete against China’s CCRC Corp, which is the largest train maker in the world.
Alstom, a French transport infrastructure company, recently confirmed that it was in talks over a possible acquisition of Bombardier Transportation, a Canadian firm. Discussions are still on and no conclusion has been made yet. Alstom will inform the public regarding any material developments with respect to this deal. As per sources, the proposed deal could be worth $7bn on the basis of enterprise value.
Merger to help Alstom Compete against China’s CCRC Corp
The merger would help Alstom to compete against China’s CCRC Corp, which is the largest train maker in the world. Alstom’s shares are up 2.88 %, while Bombardier’s shares are down 1.20 %. If the merger happens, it could give rise to a company whose total revenues are nearly $17 bn.
Speculations still on Chances of Merging
Discussions and speculations are still on regarding the chances of merging of western suppliers to form a large-scale business better positioned to compete against China’s CRRC. In early 2019, the European Commission hindered a proposed merger of Alstom with Germany’s Siemens Mobility under the EU Merger Regulation. The Commission stated the merger would have affected the competition in markets for signalling systems and high speed trains. None of the parties were said to have given remedies enough to deal with these issues.
Alstom is likely to purchase the unit with largely cash and some stock component. If the merger gets thumbs up, it could Alstom to avoid paying a material premium, mainly because of Bombardier Transportation’s cash needs. With the sale of Bombardier’s transportation division, the company will only be left with its business-jet unit. Bombardier has been striving to contain higher rail costs caused by some problematic deals in its almost $36 Bn order backlog.