Siemens-Alstom Assets Draw Bids Amid Push to Sway EU

(Bloomberg) -- Siemens AG and Alstom SA are pushing ahead with the sale of train-equipment assets in a bid to salvage their rail merger amid European Union antitrust scrutiny, people with knowledge of the matter said.

Companies including Hitachi Ltd., Wabtec Corp., Switzerland’s Stadler Rail AG and Thales SA submitted offers by a deadline earlier this month, the people said, asking not to be identified because the auction is private.

As part of the bundle, the companies are selling off signaling operations and some high-speed rail assets, the people said. The package may include Alstom’s Pendolino trains or the Velaro trains used by Eurostar as well as a five-year license for the new Velaro Novo models, the people said.

Alstom has signaled it’s unlikely to offer any further businesses for sale to gain approval for the deal because that would undermine the rationale for the transaction, two of the people said.

Click here to read more on the companies’ struggle to gain EU approval.

Representatives for Siemens, Alstom, Wabtec, Stadler Rail and Thales declined to comment.

“We continually look for the right M&A opportunities to enhance our business and add value for Hitachi’s shareholders,” Hitachi said in an emailed statement, declining to comment further.

Competition Concerns

While the merger of Europe’s two largest train makers is being championed by the German and French companies along with their governments as a way to challenge Chinese designs on the continent’s rail industry, regulators are concerned that the deal will hurt competition. In a rare attempt to sway the European Commission, U.K., Dutch, Spanish and Belgian competition authorities told the European Union’s antitrust chief in a December letter that the companies haven’t made enough concessions.

The four authorities said concessions made by Siemens and Alstom “fall far short of what would be required to address all concerns,” especially their proposal to tackle worries about very high-speed trains.

The companies had already agreed to sell a package of assets that include signaling activities and rolling-stock products that make up about 4 percent of sales of the combined entity. The commission is expected to announce its decision by Feb. 18.

Siemens and Alstom aren’t planning to sell an entire high-speed rail business, three people familiar with the matter had said previously.

High-Speed Trains

Siemens’s ICE high-speed intercity trains form almost the entire fleet of Germany’s long-distance rail service, as well as parts of France’s Eurostar fleet. The company’s ICE 3 trains were the most common model until 2016, when Siemens introduced the fourth-generation ICE 4. However, earlier models that are still in operation come with lengthy post-sale service contracts that form a large part of the company’s profit over the lifetime of the equipment.

Siemens’s metro trains, used as subways and streetcars, form the other large part of its rolling stock business. Alstom is Siemens’s main European competition for these businesses, making the fast TGV trains that criss-cross France as well as subways.

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