German industrial group Siemens and its French rival Alstom are joining forces to create a new “European champion in the rail industry” with a combined revenue of €15.3 billion ($17.7 billion).
 
The duo signed a MoU granting exclusivity to the two innovative players of the railway market for combining their mobility businesses in a merger of equals. The corporate name of the combined group will be Siemens Alstom.

The transaction brings together two innovative players of the railway market with unique customer value and operational potential. The two businesses are largely complementary in terms of activities and geographies.

As per the deal, Siemens will receive newly issued shares in the combined company representing 50 per cent of Alstom’s share capital on a fully diluted basis and warrants allowing it to acquire Alstom shares representing two percent points of its share capital.

"This Franco-German merger of equals sends a strong signal in many ways. We put the European idea to work and together with our friends at Alstom, we are creating a new European champion in the rail industry for the long term," remarked Joe Kaeser, the president and CEO of Siemens.

"This will give our customers around the world a more innovative and more competitive portfolio," he stated.

Kaeser pointed out that the global market-place had changed significantly over the last few years.

"A dominant player in Asia has changed global market dynamics and digitalisation will impact the future of mobility. Together, we can offer more choices and will be driving this transformation for our customers, employees and shareholders in a responsible and sustainable way," he noted.

The new entity will benefit from an order backlog of €61.2 billion, revenue of €15.3 billion, an adjusted EBIT of €1.2 billion and an adjusted EBIT-margin of 8 per cent, based on information extracted from the last annual financial statements of Alstom and Siemens.

In a combined setup, Siemens and Alstom expect to generate annual synergies of €470 million latest in year four post-closing and targets net-cash at closing between €0.5 - €1.0 billion.

Global headquarters as well as the management team for rolling stock will be located in Paris area and the combined entity will remain listed in France. Headquarters for the Mobility Solutions business will be located in Berlin, Germany. In total, the new entity will have 62,300 employees in over 60 countries.

On the Siemens tie-up, Henri Poupart-Lafarge, the chairman and CEO of Alstom SA, said:"Today is a key moment in Alstom’s history, confirming its position as the platform for the rail sector consolidation. Mobility is at the heart of today’s world challenges. Future modes of transportation are bound to be clean and competitive."

"Thanks to its global reach across all continents, its scale, its technological know-how and its unique positioning on digital transportation, the combination of Alstom and Siemens Mobility will bring to its customers and ultimately to all citizens smarter and more efficient systems to meet mobility challenges of cities and countries," he stated.

By combining Siemens Mobility’s experienced teams, complementary geographies and innovative expertise with ours, the new entity will create value for customers, employees and shareholders,” he added.

As part of the combination, Alstom existing shareholders at the close of the day preceding the closing date, will receive two special dividends: a control premium of €4 per share (in total = €0.9 billion) to be paid shortly after closing of the transaction and an extraordinary dividend of up to €4 per share (in total = €0.9 billion) to be paid out of the proceeds of Alstom’s put options for the General Electric joint ventures of approximately €2.5 billion subject to the cash position of Alstom.  

According to Siemens, the businesses of the two companies are largely complementary. The combined entity will offer a significantly increased range of diversified product and solution offerings to meet multi-facetted, customer-specific needs, from cost-efficient massmarket platforms to high-end technologies.

The global footprint enables the merged company to access growth markets in Middle East and Africa, India, and Middle and South America where Alstom is present, and China, US and Russia where Siemens is present.

Customers, said the company, will significantly benefit from a well-balanced larger geographic footprint, a comprehensive portfolio offering and significant investment into digital services.

The combination of know-how and innovation power of both companies will drive crucial innovations, cost efficiency and faster response, which will allow the combined entity to better address customer needs, it added.  

The new board of the combined group will consist of 11 members and will be comprised of 6 directors designated by Siemens, one of which being the chairman, 4 independent directors and the CEO.

In order to ensure management continuity, Poupart-Lafarge will continue to lead the company as CEO and will be a board member. Jochen Eickholt, CEO of Siemens Mobility, shall assume an important responsibility in the merged entity, he added.-TradeArabia News Service