Siemens, Alstom Mount Last-Ditch Effort to Save Deal

(Bloomberg) -- Siemens AG and Alstom SA are considering adding sweeteners to a package of assets for sale in a last-ditch effort to gain antitrust approval from the European Commission and salvage their rail deal, according to people familiar with the matter.

The German and French train equipment suppliers’ new offerings include possible contract extensions and patents and are being discussed with antitrust officials and potential bidders, said the people, who asked not to be named because the discussions aren’t public. The former rivals are working to save the tie up that would have combined sales of about 15 billion euros ($17 billion) from getting vetoed by the commission on concerns it’ll crimp competition, they said.

It remains unclear whether the steps will be enough to avoid antitrust opposition, the people said, though the recent meetings with European officials left the companies slightly more optimistic a compromise can be reached, one of them said.

Any new commitments would come too late to test with market participants ahead of an EU deadline to complete the merger review by Feb. 18. That means if the companies still hope to win clearance for the deal, they would have to propose concessions that move significantly beyond what has already been offered to sufficiently convince regulators without a market test.

Spokesmen for Siemens, Alstom and the commission all declined to comment. Alstom shares extended gains to rise as much as 1.8 percent in Paris trading while Siemens fell 0.3 percent in Frankfurt.

Brinkmanship

Siemens and Alstom’s planned rail colossus appears to be teetering on the brink even after some European Union officials at a meeting on Tuesday voiced support for the need to defend big European Union companies against Chinese rivals. In what was a broad discussion about how to ensure fair competition with China, France’s Pierre Moscovici led the charge among a group of EU commissioners urging the creation of European champions to face up to foreign competitors. Siemens and Alstom have said the deal is needed to counter competition from China.

Siemens, Alstom Mount Last-Ditch Effort to Save Deal

Briefing reporters after the behind-closed-doors meeting, Moscovici, who is in charge of economic affairs, didn’t offer a clear indication of the level of support for the deal among colleagues -- and how that could affect the outcome of the review by his colleague in charge of the competition remit, Margrethe Vestager.

‘Not Naive’

The EU is “not naive” and aims to “take into account the evolution of the economy of tomorrow,” Moscovici said. “The decisions taken by the commission have never -- and won’t be -- based on any kind of ideological aspect or guidance. It will be done objectively and with a strategy."

“We have had, I think, a very good discussion about competition and the global level playing field and that kind of a relationship, how we see that,” Vestager told Bloomberg News after the meeting. She declined to elaborate.

Despite getting a say on big merger rulings, commissioners typically follow the advice of their colleague responsible for competition, without entering into debates on substance.

The deal has been facing headwinds for weeks. Rail network operators have called for a veto and smaller competition authorities took the rare step of publicly criticizing the companies’ concessions as insufficient. Earlier this month, the companies got a gloomy assessment of feedback on its initial proposal to sell off of overlapping units that was intended to allay concerns over the tie-up.

Unless last-minute concessions eliminate EU concerns, Siemens and Alstom risk a formal ban on the deal -- essentially killing a French-German business alliance designed to create a European train-making champion big enough to take on Asian rivals.

While the final deadline is mid-February, Vestager made her views clear last week: Politically backed industrial giants shouldn’t be built by sidestepping the EU’s tough merger rules.

Still, the French government on Wednesday continued to put pressure on the commission to give the deal the green light.

“It would be a political mistake and an economic error,” Benjamin Griveaux said at his weekly press conference in Paris. “It would also send a bad message to the people of Europe” because the block of countries has so far “failed to protect its people” in the face of global competition.

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