Siemens AG and Alstom SA suffered the final blow to their rail merger plans after European Union antitrust regulators refused to cave in to warnings about the looming threat of Chinese competition.
EU Competition Commissioner Margrethe Vestager formally vetoed the tie-up, saying the companies “were not willing to address our serious competition concerns” about the combined firm’s control over rail signaling systems and very high-speed trains.
The decision is a victory for Vestager who came under intense pressure from French and German ministers demanding the creation of a European “champion” able to meet head-on competition from China. The tie-up—unveiled in September 2017—would have merged Siemens’s mobility unit and Alstom to create an entity with about 15 billion euros ($17 billion) in revenue.
“We’re not supposed to be political,” Vestager told reporters in Brussels. “We’re not supposed to say, lean to one side, or the other side, we’re supposed to look at the facts of the case. But we have a very, very clear value-based mandate, to make sure that the market serves consumers and customers.”
The deal would have created the undisputed market leader for some signaling and a dominant player in very high-speed trains, the EU said. Chinese suppliers for signaling “are not present” in Europe and it “will take a very long time before they can become credible suppliers.” Chinese rivals for very high-speed trains are “highly unlikely” to rival the companies in the region in the foreseeable future.
The companies failed to fully address the EU’s concerns because their offer to sell signaling businesses was “a complex mix” that wasn’t a “standalone and future-proof business” allowing a buyer to compete against the merged firm, the EU added.
Alstom shares rose as much as 5.5 percent in Paris, while Siemens dropped as much as 1 percent in Frankfurt.
The offer to sell Alstom’s Pendolino was deemed to fall short because it was “a train currently not capable of running at very high speeds.” A pledge to license Siemens’ Velaro train technology was restrictive and wouldn’t have allowed a rival develop a competing very high-speed train, the EU said.
Siemens CEO Joe Kaeser said in a statement that while not unexpected, the decision “proves that Europe urgently needs structural reform.”
“The upcoming European elections and subsequent new leadership will provide a unique opportunity to shape a Europe of the future,” Kaeser said in the statement.
French Finance Minister Bruno Le Maire and German Economy Minister Peter Altmaier, who lobbied in favor of the deal, said they would work to overhaul European competition rules and industrial policy.
“This decision is based on the facts at hand after a very thorough 16-month investigation by the European Commission,” Canadian rival Bombardier Inc. said in a statement. The tie-up would have “severely undermined the health and competitiveness of the whole European rail market, leaving European consumers, both as rail users and taxpayers, to pay the price.”
