EU sees Siemens-Alstom deal remedies as inadequate

The firms have offered to sell signalling assets as well as provide longer licensing agreements, and have already identified potential acquirers


BRUSSELS • A last-ditch bid by Siemens AG and Alstom SA to win approval from the European Union’s (EU) top antitrust regulator for their planned rail merger isn’t good enough to allay concerns about competition, according to a person with knowledge of the situation.

The fresh concessions, first reported by Bloomberg on Jan 25, come too late and fall short of the bold steps that European Commissioner Margrethe Vestager would need to grant approval for the deal, said the person, who asked not to be identified because the matter is private. Alstom shares dropped as much as 4.3% yesterday, while Siemens declined 0.8%.

Alstom confirmed yesterday the companies’ package of remedies on the deal was modified, although the magnitude of asset sales was unchanged at about 4% of revenue of the combined entity.

While the French rail equipment supplier didn’t provide details, people familiar with the matter have said the companies have offered to sell signalling assets as well as provide longer licensing agreements, and have already identified potential acquirers.

Representatives of Alstom, Siemens and the European Commission declined to comment on the EU’s position.

Vestager has come under intense political pressure from France and Germany to allow the deal to go through, with the governments arguing in favour of the emergence of a European champion to take on competition from China. Executives and politicians have mounted an unrelenting campaign to sway her, with French Finance Minister Bruno Le Maire saying in a tweet on Sunday that “nothing can justify” an EU veto of the deal.

Siemens CEO Joe Kaeser waded in yesterday, saying in his own tweet that: “Those who love Europe should shape its future and not depend on backwards looking formulas. It must be bitter to be technically right but do everything wrong for Europe.”

After a meeting in Paris last week with Le Maire, Vestager had left the door open to a new proposal from the companies, telling reporters it would have to be “very blunt” — or sizeable.

The commission is set to make a decision on Feb 6 or Feb 12 on the tie-up, ahead of a Feb 18 deadline.

Political Levers
The final step in the decision-making process, Vestager has to present her case to a full meeting of the EU’s commissioners.

A rejection at this level is extremely rare. The fact that Siemens and Alstom have pulled political levers to get the deal done isn’t unheard of, but the intensity of public statements by ministers and commissioners is unusual.

“We need to have European champions. And I think that it would be much better if this merger was authorised,” economic and monetary commissioner Pierre Moscovici, a Frenchman, said last week in Davos. “We need to take into account the new way the world economy is functioning; the role of China especially.”

A collapse of the deal would be a setback for two historic European industrial manufacturers and former fierce rivals. Their plan, unveiled in September 2017, was to build a transportation giant out of Siemens’ mobility unit and Alstom, with the idea that the resulting entity, with combined sales of about €15 billion (RM69.87 billion), would be able to counter global competition, especially from China.

No Sway
The companies first offered up a concession package in December, and attempted to add sweeteners in subsequent conversations with the commission, people familiar with the matter have said, but were unable to sway the regulator then. At issue for the regulator are high-speed trains, which both companies make, as well as the duration for licensing agreements.

When tie-ups between companies draw concerns about future competition, EU regulators usually demand the sale of standalone businesses that can be carved out to produce a future rival. Licensing technology isn’t usually viewed as strong enough. — Bloomberg