Blocked merger between Siemens and Alstom a win for Bombardier, say analysts
February 6, 2019 | By Christopher Reynolds The Canadian Press
February 6, 2019 – Bombardier Inc. can rest a little easier after European antitrust authorities blocked a plan by manufacturing giants Siemens and Alstom to merge their rail operations, analysts say.
The European Commission announced its decision Wednesday to bar Siemens of Germany from acquiring the French Alstom’s train-making business, arguing it could reduce competition in the signalling and high-speed train markets.
The deal would have created a $22.5-billion company with more than 60,000 employees, versus Bombardier’s US$8.5 billion in train unit revenues in 2017.
The scuppered merger would have given the combined company a “dominant position” in Europe and left Bombardier’s passenger rail operations a “distant third” globally, says analyst Cameron Doerksen of National Bank Financial.
“[It] is still a large player with a global presence and would have remained a top-two player in the key Western European markets of Germany, France and the U.K.,” he says. Still, the deal may have reduced opportunities for the Berlin-based division of Bombardier Inc. to team up on contract bids with Siemens and Alstom and hurt its prospects in the market for rail signalling systems, he added.
Desjardins Securities analyst Benoit Poirier notes the combined entity’s share of the U.K. signalling market would have been 93 per cent, according to figures from the country’s rail agency.
“Now that the merger has been rejected, we believe Bombardier Transportation will be able to better compete in the marketplace and win its fair share of contracts,” Poirier says in a note to investors.
The would-be Siemens-Alstom would also have been required to divest certain assets in signalling, says Doerksen. “Given Bombardier’s limited financial flexibility, it would have been a challenge for Bombardier Transportation to bid on any of those assets, opening the door for another competitor to grow its signaling presence.”
Bombardier stocks were up five per cent to $2.04 in mid-afternoon trading.
Bombardier says it is “pleased” with the European Commission ruling on the merger.
“It would have severely undermined the health and competitiveness of the whole European rail market, leaving European consumers, both as rail users and taxpayers, to pay the price,” says company lawyer Daniel Desjardins in a statement.
Bombardier also announced on Wednesday a US$437-million order for nine CRJ900 aircraft to Chorus Aviation Inc. subsidiary Jazz Aviation, which provides regional flights for Air Canada.
Further, Bombardier rolled out its new CRJ550 aircraft, set to replace older fleets of CRJ700 50-seaters.
The fate of the aging CRJ regional jets had been unclear since the company announced in October 2017 that Airbus SE would acquire a majority 50.01 per cent stake in the C Series, effective July 1 of last year. Chief executive Alain Bellemare said in November the company was losing money on the aircraft line.
United Airlines was named as the launch customer for the CRJ550.
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