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Siemens and Alstom prepared to walk away from merger if EU Commission rejects concessions

Siemens and Alstom will reportedly offer no further concessions to European regulators in their bid to merge their operations and form a European rail champion.

The controversial Franco-German rail merger has been heavily criticised and the EU Commission has repeatedly stated its objections, despite both the French and German governments being in favour of the deal.

Siemens and Alstom previously submitted a remedy package in December in response to the EU’s objections, but rivals, regulators, and five national competition authorities have echoed the commission’s stance that the concessions are insufficient.

Despite reports that the two companies were working on further concessions, sources close to the negotiation have said that Siemens and Alstom are prepared to walk away from the deal if its not passed in its current state.

As reported in the FT, the source said that the companies feel Brussels has set the bar so high that it cannot be overcome without offsetting the commercial reasons for pursuing the merger in the first place.

The European Commission is worried that the new Siemens-Alstom company would dominate the market and effectively kill off competition in the supply of rolling stock, signalling, and high-speed trains, but sources dismissed this as there are no tenders in the pipeline.

Reuters reported that a source from Siemens said: “If the commission refuses, then we cannot do the deal. Then this topic is over.”

Earlier this week the German competition watchdog raised its “serious doubts” over the proposed merger, and said that following the concession offered by the European rail companies, its objections still stand.

Siemens and Alstom’s remedy package includes mainly signalling activities as well as rolling stock, worth around four percent of the sales of the combined entity, according to Alstom, and was updated to include one of their high-speed rail technologies.

Alstom said in its third-quarter earnings published today that it feels the proposed concessions are “appropriate and adequate” to address the commission’s concerns, but recognises that there is no certainty that it will be sufficient to alleviate the concerns of the commission.

A deadline of 28 January was set for the merger, although it has been reported that the deal may need to be approve before a 18 February deadline.

Image credit - Philipp Schulze/DPA/PA Images