Siemens AG and Alstom SA were given some hope their endangered plan for a rail merger might survive after France vowed to step in to try to convince Europe’s top antitrust official not to block the deal.
Finance Minister Bruno Le Maire and European Commissioner Margrethe Vestager are scheduled to meet Monday in Paris. “Conditions are met” for a successful merger, the minister was quoted as saying in the Journal du Dimanche newspaper, reiterating that it would be a political mistake to block the deal.
The move by the French government came after signals increasingly pointed to the accord unraveling. Bloomberg News reported Friday the commission was expected to block the tie-up over concerns it would stifle competition in the region’s train-equipment market. Alstom had already warned its attempts to render the combination more palatable to the commission might come up empty, while Siemens was said to be considering alternatives for its business.
Proposed concessions aimed at allaying EU objections—plus a last-minute lobbying campaign from politicians warning of the threat of Chinese rivals—had so far failed to sway Vestager, said a person familiar with the matter, who spoke on condition of anonymity. A senior German official who asked not to be named also said he expected a veto.
A collapse of the deal 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.”
Vestager’s thinly veiled warning followed a last-ditch salvage attempt by Siemens and Alstom executives to make further concessions, Bloomberg News has reported. Representatives for Siemens, Alstom and the commission declined to comment. The deal faces a Feb. 18 EU deadline.
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.
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.
