EU regulators likely to derail Siemens-Alstom merger plan: report

The European Commission is likely to block a plan by Siemens AG and Alstom SA to merge their rail units to create a European rail giant to ward of threats posed by Chinese giant CRRC Corp Ltd as the two European rivals failed to convince EU anti-trust regulators.

The move by EU antitrust regulators come despite German and French backing for the merger. EU regulators fear the merger would stifle competition in the region’s train-equipment market, according to people familiar with the matter. 
Germany and France supported a deal, saying it would help secure the competitiveness of the European rail industry. However, European Competition Commissioner Margrethe Vestager has said Europe cannot build industrial champions by undermining competition.
“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.”
French finance minister Bruno Le Maire had earlier warned that the European Commission would make an “economic error and political mistake” if it were to block the merger of Alstom’s and Siemens’ rail businesses.
Le Maire said the French and German governments were fully behind the merger, as were Alstom chief executive Henri Poupart-Lafarge and his Siemens counterpart Joe Kaeser.
The EU did not accept the concessions aimed at allaying EU objections and also overlooked last-minute lobbying campaign by politicians warning of the threat of Chinese rivals.
The two companies had offered a package of businesses to sell to gain the green light, including signaling and fast-train operations.
The EU decision, expected to be announced early next month, could stymie the merger plan and push the European rivals to push for alternatives.
Siemens could float its own in-house rail technology division, called Siemens Mobility, while keeping a stake.
The rail merger deal would have created the world’s second largest rail company with combined revenues of around 15 billion euros ($17.05 billion), roughly half the size of China’s state-owned CRRC Corp Ltd but twice the size of Canada’s Bombardier.
The EC decision could spur efforts to modify the bloc’s competition rules, among the most powerful in the world, to take into account unfettered non-EU rivals and US tech giants.
The decision would be a setback for Siemens and Alstom as they continue to face competition from Chinese rival.
Siemens and Alstom had spent months lobbying French and German governments for their combination and get 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.
The Siemens-Alstom deal faces an 18 February 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.
An EU veto can make consolidation in Europe ground to a near halt after regulators EU blocked CK Hutchison Holdings Ltd’s bid to create the UK’s biggest mobile phone carrier in 2016. The EU also stopped Deutsche Boerse AG’s planned takeover of London Stock Exchange Group Plc in 2017, days before an EU veto of a Croatian cement deal.