"A very nice operation." Here is what Alstom CEO Henri Poupart-Lafarge said after the French railway manufacturer announced on Monday February 17 that it had signed a protocol with the multinational Bombardier and the Caisse de depot et placement du Quebec (CDPQ) to buy 100% of its transport branch.

"This acquisition will strengthen our international presence and our ability to meet the ever-increasing demand for sustainable mobility solutions," added Henri Poupart-Lafarge.

The Canadian group, in financial difficulties, intends to allocate the proceeds of the sale - between 5.8 and 6.2 billion euros - to the reduction of its debt, which amounted at the end of 2019 to 9.3 billion dollars US.

>> See: Alstom-Siemens: the derailed merger project

Bombardier Transportation, based in Berlin, generated sales of € 7.7 billion in 2019, ending the year with an order book of € 33 billion. It employs 36,000 people.

Bombardier notably has the largest railway plant in the country in Crespin, in the north of France, with 2,000 employees.

Alstom, which operates many smaller sites, closed its last financial year 2018-2019 with total turnover of 8.1 billion euros, its order book peaking at 43 billion euros as of December 31, 2019. The TGV manufacturer employs 36,300 people, including 9,500 in France.

"An offensive merger"

The two groups have a virtual monopoly on rolling stock in France, where they collaborate regularly as on the Paris metro and RER.

"There is no idea of ​​restructuring or a threat to employment in this acquisition, quite the contrary," Henri Poupart-Lafarge assured journalists. "This is not a defensive merger in which we would try to gain cost synergies through restructuring, it is an offensive merger in a growing market."

"Adaptations" may be necessary, "punctually", depending on the load plans of the different factories, he recognized, however, questioned on the German sites of Bombardier. In any event, neither the Bombardier plant in Crespin, nor the Alstom plant in Valenciennes, a few kilometers away, was affected, according to him.

Compete with the Chinese CRRC juggernaut

With a combined turnover of more than 15 billion euros and an order book exceeding 75 billion, an Alstom-Bombardier marriage must create a powerful group to confront the Chinese juggernaut CRRC, whose sales exceeded 28 billion d euros in 2018, and which now exports worldwide.

The Chinese threat and the need to progress in digital technologies had already been mentioned to justify the takeover of Alstom by Siemens, blocked in February 2019 by the European Commission, which feared an overly dominant position in Europe in railway signaling and trains high speed.

It will remain to be seen how Brussels will react to this new railway marriage. French Finance Minister Bruno Le Maire is set to meet on Tuesday with Commission Vice-President Margrethe Vestager, whose veto was widely criticized last year in Paris and Berlin. "We are confident," noted Henri Poupart-Lafarge on Monday, while the European Commission declined to comment.

Refocused since November 2015 on rail transport after the controversial sale of its energy branch to the American General Electric (GE), the French group enjoys a healthy financial situation.

An operation that should be done in the first quarter of 2021

The CDPQ, which currently owns 32.5% of Bombardier Transportation, is expected to become its largest shareholder at the end of the operation with around 18% of the capital, according to the French group. The Caisse must reinvest in Alstom all of the net proceeds from the sale of its stake in Bombardier Transportation and invest an additional 700 million euros in the group.

Alstom is committed to developing its activities in Quebec and installing the headquarters of its American operations in Montreal.

Bouygues, the leading shareholder in the French rail group with 15% of the capital, will retain around 10%. And Bombardier should recover 3%.

The transaction, partly paid in cash and partly in shares newly issued by Alstom, still needs to be approved by the competition authorities, notably Brussels. "The completion of the transaction is expected in the first half of 2021," said Alstom.

With AFP

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