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German industrial group Siemens AG (SIEGn.DE) and French rival Alstom SA (ALSO.PA) agreed on Tuesday to merge their rail operations, creating a European champion to better withstand the international advance of China’s state-owned CRRC Corp Ltd (601766.SS).
Siemens will own 50 percent plus a few shares of the joint venture, while Alstom will supply Henri Poupart-Lafarge as chief executive, helping to counter criticism that France is giving up control of another national industrial icon.
The non-executive chairman will come from Siemens.
The framework deal, which still has to be approved by Alstom shareholders as well as regulators, is a Franco-German industrial breakthrough for French President Emmanuel Macron but a move that has riled opposition politicians.
Finance Minister Bruno Le Maire said on Tuesday the French government welcomed the planned tie-up, which he said would protect French jobs.
The French state said it would not exercise an option to buy a 20 percent stake in Alstom from industrial group Bouygues SA (BOUY.PA).
The Siemens and Alstom transport businesses span the iconic French TGV and German ICE high-speed trains as well as signalling and rail technology. They have combined sales of 15.3 billion euros ($18 billion) and earnings before interest and tax of 1.2 billion euros.
“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,” said Siemens CEO Joe Kaeser.
Alstom’s Poupart-Lafarge said: “Today is a key moment in Alstom’s history, confirming its position as the platform for the rail sector consolidation.”
The deal leaves out in the cold Canadian transportation group Bombardier Inc (BBDb.TO), which also held talks with Siemens, sources have said, and which faces a separate battle this week to protect jobs in Quebec and Northern Ireland.
China’s CRRC, with annual revenue of about $35 billion, is bigger than Siemens Mobility, Alstom and Bombardier Transportation combined.
Previously focused on China, it has won projects in Britain and the Czech Republic in the past year, and is eyeing the United Kingdom’s High Speed 2 project, which will connect London with cities in the north of England.
This article first appeared on www.reuters.com
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