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Alstom and Siemens set to merge rail assets, reports say

PARIS-The German government is welcoming the planned merger of French high-speed train maker Alstom with the railway business of Germany's Siemens as "a co-operation project of European and global standing".

The French state will shed its stake in the new entity, which has an order backlog of 61.2 billion euros and a combined revenue of 15.3 billion euros, according to information from the last annual financial statements of both groups.

Siemens and Alstom have signed a Memorandum of Understanding to combine Siemens' mobility business including its rail traction drives business with Alstom.

Siemens will own 50% of the new joint venture, which will be called Siemens Alstom, while Alstom will supply Henri Poupart-Lafarge as chief executive.

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"They lost out this time but there's presumably going to be more consolidation", he said, noting competitors of varying sizes remain around the world. "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.

"It is not that often that we see an M&A scenario that we like, and one that really is a "win-win" - but there is scope for that to be the case here", Ben Uglow, an analyst at Morgan Stanley, wrote in a note.

But critics in France have denounced the deal as a sellout to Germany.

Siemens makes the inter-city ICE trains that run on German long-distance routes, while Alstom makes the French equivalent, the TGV. Alstom has pared back its operations in recent years after selling its power-generation business to General Electric Co.

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As the supplier of Eurostar's original fleet, Alstom had seemed to be in prime position to win the order with a modified version of its iconic TGV.

Alstom and Siemens, Europe's leading train manufacturers, have agreed to join forces.

Tuesday's deal is meant to help Europe's rail industry confront an increasingly serious threat: CRRC Corp., the world's biggest rail supplier, and other companies in China's government-run train industry. This new merged company will therefore have access to an increasingly global market.

Acknowledging the shift in competition, Kaeser added that the global marketplace had changed significantly over the past few years, with "a dominant player in Asia" affecting market dynamics.

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Bombardier shares in Toronto today fell 6.17% to C$2.13 each.

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