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Siemens-Alstom Rail Merger Is Poised to Be Barred by EU

Siemens-Alstom Rail Merger Is Poised to Be Barred by EU

(Bloomberg) -- The European Commission is expected to block a plan by Siemens AG and Alstom SA to merge their rail units over concerns that the deal between two rivals would stifle competition in the region’s train-equipment market, according to people familiar with the matter.

Proposed concessions aimed at allaying EU objections -- plus a last-minute lobbying campaign from politicians warning of the threat of Chinese rivals -- failed to sway Margrethe Vestager, the EU’s antitrust commissioner, said one of the people, who spoke on condition of anonymity. A senior German official who asked not to be named also said he expected a veto.

Siemens-Alstom Rail Merger Is Poised to Be Barred by EU

The decision would be a setback for the manufacturers, which had strong political backing from the French and German governments for their combination and spent months lobbying to get it past regulators. The plan, unveiled in September 2017, was to build a transportation giant out of Siemens’s mobility unit and Alstom, with the idea that the resulting European rail champion, with combined sales of about 15 billion euros ($17 billion), would be able to counter competition from China.

Yet signs that the deal was in trouble started to emerge in October when the Commission issued a harsher-than-expected statement of objections. The companies offered up a package of businesses to sell to gain the green light, including signaling and fast-train operations, but the day after a crucial meeting with regulators, the writing was on the wall.

“We can’t build those champions by undermining competition,” Vestager said Jan. 9 in Berlin. “We can’t build them with mergers that harm competition, or by looking the other way when Europe’s businesses break our rules.”

Representatives for Siemens, Alstom and the commission declined to comment. Reuters reported earlier on the EU’s position. The deal faces a Feb. 18 EU deadline.

Vestager’s thinly veiled warning followed a last-ditch salvage attempt by Siemens and Alstom executives to make further concessions, Bloomberg News has reported. It also came after French Finance Minister Bruno Le Maire gave his own warning, saying any attempt to block the deal would amount to a "political mistake.” The French company warned this week that the deal could be blocked.

Siemens-Alstom Rail Merger Is Poised to Be Barred by EU

While Vestager has blocked only three deals since she became commissioner in 2014, EU opposition has forced several other companies to abandon transactions, often after they decided concessions to gain approval would be too painful.

Veto Chill

An EU veto can chill deal-making across an industry. Telecom consolidation in Europe ground to a near halt after regulators EU blocked CK Hutchison Holdings Ltd.’s bid to create the U.K.’s biggest mobile phone carrier in 2016. The EU also stopped Deutsche Boerse AG’s planned takeover of London Stock Exchange Group Plc in 2017, days before an EU veto of a Croatian cement deal.

The Siemens and Alstom combination would have given the German company control of an icon of French industry that developed the high-speed TGV trains that zip across the countryside at upwards of 300 kilometers an hour (186 miles per hour). President Emmanuel Macron’s government backed the deal after receiving assurances on jobs, and German Chancellor Angela Merkel has promoted a platform of closer European ties.

Capping years of speculation in the industry about the need for consolidation, the tie up was to mirror the emergence of European planemaker Airbus in the 1970s that went on to become the biggest competitor to Boeing Co.

Siemens Alstom, as the combined company was to be called, would have had about 62,000 employees and become the second-largest maker of rail cars and locomotives after China’s CRRC Corp.

--With assistance from Ania Nussbaum, Stephanie Bodoni and Gaspard Sebag.

To contact the reporters on this story: Aoife White in Brussels at awhite62@bloomberg.net;Oliver Sachgau in Munich at osachgau@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Tara Patel, Peter Chapman

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