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European rail mega-merger is about business not politics, Siemens and Alstom CEOs say

  • Siemens and Alstom's decision to merge their rail operations is about business and not politics, according to the companies' CEOs, despite the deal being framed as a response to China's advancing dominance.
  • "The rationale is undoubtedly (to do with) business, it's a unique opportunity to create a global leader and a European champion… in a dynamic market," Alstom CEO Henri Poupart-Lafarge said.

Siemens and Alstom's decision to merge their rail operations is about business and not politics, according to the companies' CEOs, despite the deal being framed as a response to China's advancing dominance.

"The rationale is undoubtedly (to do with) business, it's a unique opportunity to create a global leader and a European champion … in a dynamic market," Alstom CEO Henri Poupart-Lafarge said. He added the deal would create a "world leader" in the rail business.

"We're combining our forces both in terms expertise … to create this new champion," he said.

Meanwhile, Siemens CEO Joe Kaeser said the deal would make the two companies more competitive and that the merger was a "compelling" deal.

In the wider economic environment, Kaeser said the deal made sense because "mobility will be one of the major beneficiaries of population growth in the world ... So we have a very positive underlying scheme to make this a success."

He welcomed the state approval of the deal, saying "we welcome that the governments on both sides have been very supportive, as have the unions by the way."

"Last but not least if you look at the share price in the last few days, it seems that we have almost all the stars - the stakeholders - aligned."

Their comments come after it was announced on Tuesday that the German industrial group Siemens and its French competitor Alstom, will merge their rail operations in a bid to compete with China's state-owned CRRC.

The merged companies will be known as Siemens Alstom and will be led by Alstom's current Chief Executive Henri Poupart-Lafarge. Siemens will designate six directors to the 11-member board of directors and will own a 50 percent share of the new company.

German ICE train manufacturing company Siemens President and CEO, Joe Kaeser (L) shakes hands with French railway transport company Alstom CEO, Henri Poupart-Lafarge following a press conference announcing the union between French railway transport company Alstom and Siemens on September 27, 2017 in Paris.
THOMAS SAMSON/AFP/Getty Images
German ICE train manufacturing company Siemens President and CEO, Joe Kaeser (L) shakes hands with French railway transport company Alstom CEO, Henri Poupart-Lafarge following a press conference announcing the union between French railway transport company Alstom and Siemens on September 27, 2017 in Paris.

After more details of the deal were released on Wednesday, shares of Siemens were up 2 percent while Alstom shares were up 6.2 percent.

Kaeser said there was a lot of work to complete the deal and he said regulatory matters needed to be dealt with. "There is a lot to do, then we go after the synergies," he said, which are estimated to amount to around 470 million euros ($551.8 million) annually and expected four years after the deal has closed.

As a result, Kaeser said there was bound to be redundancies as a result of the companies merging.

"Of course after the combination of businesses there will also be redundancies, there are two companies, two CEOs, two finance directors, two HR departments and you only need one. So of course there will be synergies relating to the combination of the businesses."