Alstom ready to sell French rail unit to win Bombardier deal

Publish July 13, 2020

France’s TGV high-speed train maker Alstom offered to sell a French rail factory and make other concessions to win European Commission approval for its planned purchase of Bombardier’s transportation business.

The commitments also included selling Alstom’s regional train unit Coradia Polyvalent and divesting a Bombardier commuter trains division and the related production facilities at its Hennigsdorf site in Germany.

Alstom’s bid in February of up to 6.2 billion euros ($7 billion) for Montreal-based Bombardier’s rail business has faced scrutiny from EU antitrust authorities, which have been expected to demand concessions to approve the deal.

European Union (EU) antitrust regulators have set a new deadline of July 31 to rule on Alstom’s bid for Bombardier’s transport business after the French TGV high-speed train maker offered to sell assets to address competition concerns.

The European Commission, which posted the new deadline on its site on Friday, will now seek feedback from rivals and customers of both companies before deciding whether to accept the package or demand more in line with its procedures.

The EU competition enforcer could also open a four-month long investigation if it has serious doubts. Alstom on Thursday offered to sell its Reichshoffen regional train factory in eastern France, its regional train unit Coradia Polyvalent, and a Bombardier commuter trains division and the related production facilities at its Hennigsdorf site in Germany.

It also offered to provide access to some products within Bombardier’s train control systems and signalling units.

The proposed assets are equivalent to the size of a medium-sized player in Europe, people familiar with the matter said.

Alstom proposed its bid in February for Montreal-based Bombardier’s rail business and EU antitrust authorities were expected to demand concessions to approve the deal.

Alstom is offering more than it thinks is necessary in a bit to get the deal done, people familiar with the matter said.

Last year, EU regulators blocked Alstom’s attempt to merge rail assets with Siemens.

By buying Bombardier’s train division, Alstom is seeking to create the world’s second largest train manufacturer to compete more effectively with Chinese leader CRRC Corp.

Alstom said it would sell its Reichshoffen regional train factory in eastern France, which employs some 800 staff, confirming a report by Reutrs.

France’s Force Ouvriere (FO) union said it opposed the plant’s disposal and called on Alstom and Bombardier to maintain the jobs affected by the concessions plan.

In Germany, where Bombardier has big operations, the IG Metall union backed the principle of a merger in an interview with WirtschaftsWoche magazine but called for job guarantees.

The EU is due to decide whether or not to pursue a deeper enquiry on July 16, following its preliminary review of the deal.

Alstom’s other concessions included providing access to some products within Bombardier’s train control systems and signalling units.

Bombardier said separately it supported the concessions plan, and the deal was on track to close in the first half of 2021.

Meanwhile, French President Emmanuel Macron’s government needs to rebuild post-crisis confidence in the economy with spending restraint rather than new tax cuts while keeping public debt capped, the head of the central bank said on Thursday. In an annual letter to the president, Governor Francois Villeroy said households were sitting on 100 billion euros ($113 billion)- 4% of GDP - of extra savings built up during a nearly two-month coronavirus lockdown when consumers could not spend in stores and restaurants.

But for the money to filter into the economy and help fuel a recovery, Villeroy said households needed visibility on taxes, which are among the highest in the world and are often tinkered with by successive governments.

“It could be a guarantee of fiscal stability over several years. France doesn’t have the means to finance new tax cuts,” Villeroy said.

Finance Minister Bruno Le Maire has said that a recovery plan due to be presented at the end of the summer should include a cut in a range of levies companies pay on top of usual corporate income tax, which they say are a major obstacle to international competitiveness.

With the coronavirus crisis expected to push French public debt this year to 120% of GDP from 100%, Villeroy said that keeping government spending stable was indispensable to bring the burden down to pre-outbreak levels.

“France’s status in Europe will hinge on our level of debt,” Villeroy said in the letter.


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