Siemens-Alstom Deal Said to Lose Vote of National Regulators

(Bloomberg) -- National regulators from throughout the European Union refused to give their support to Siemens AG and Alstom SA’s rail merger, instead backing EU Competition Commissioner Margrethe Vestager’s plan to block the deal, according to people familiar with the vote.

The advisory vote of regulators Thursday means that the EU could issue a formal decision blocking the merger as soon as next week. Vestager may even issue the final ruling through a written procedure that allows her to avoid a debate with other commissioners amid heightened political pressure, according to one of the people, who asked not to be identified because the review process is confidential.

The decision is a huge setback for the companies, which had strong political backing for the deal. French and German ministers ratcheted up pressure on the commission in recent weeks, calling for 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.

Both Siemens and Alstom declined to comment on the vote of national regulators.

Signs of trouble emerged in October when the Commission issued a statement of objections that was harsher than expected. Siemens and Alstom offered up a concession package in December, and attempted to sweeten that package in subsequent conversations with the commission, people familiar with the matter said, but were unable to sway the regulator.

One of Vestager’s top deputies defended the commission’s handling merger reviews in a speech Friday, though he was careful not to specifically mention Siemens.

Carles Esteva Mosso told a conference in Brussels that the European Commission has cleared deals that "create a world leader" when companies are “willing to eliminate any overlap in our jurisdiction." He specifically cited the $45 billion merger of Linde AG and Praxair Inc. as well as another transaction that led to the creation of LafargeHolcim Ltd.

Mosso, who is Vestager’s deputy director general for mergers, told the audience that discussions on concessions "are not negotiations" and are "much closer to a compliance process." The companies have to remove concerns raised by the regulators.

One of the commission’s main objections centered around the companies’ businesses making very high-speed rail, or trains that can travel faster than 300 km per hour. The regulator had wanted Siemens to sell both its current platform called Valero, as well as a planned Velaro Novo model, something the company was unwilling to do, people familiar with the matter said in January.

Another condition was for Siemens and Alstom to sign away their rights to certain train technologies for a decade, while the companies were only willing to offer five years.

©2019 Bloomberg L.P.