Why it matters. Alstom swallows Bombardier Transport, a new giant is born


French manufacturer Alstom completed the takeover of Bombardier Transport (BT) on Friday, a company with a maximum cost of 5.3 billion euros.

The new number 2 in the world in rail transport

The future group generates sales of 15.7 billion euros and an order backlog of 71.1 billion euros.

Alstom will employ around 75,000 people in 70 countries, with the world headquarters not relocating from Saint-Ouen near Paris.

The Caisse des Dépôts and Placement du Québec becomes its largest shareholder with 18{7d3485657e94c2a51293ca186d4450b2f27c317aa7ee3509dac6c8bbf5461118} of the capital, Bouygues with 6{7d3485657e94c2a51293ca186d4450b2f27c317aa7ee3509dac6c8bbf5461118}.

The French group will become 'the world leader outside of the Chinese, a number two that will far surpass number three,' said Bertrand Mouly-Aigrot, CEO of the consulting firm Archery.

Alstom and Siemens panic over the Chinese threat

The threat posed by the Chinese CRRC officially motivated the planned merger between Siemens Mobility and Alstom, which was blocked by the European Commission in February 2019.

A year after the failure of this Franco-German commitment, Alstom was able to get back on its feet due to the difficulties of the Canadian conglomerate Bombardier by making an offer to stand out on its Berlin-based rail section.

'In the previous deal, it was Siemens that had priority, while there it was clearly Alstom,' notes François Guénard, consultant at Roland Berger.

Complementarity and versatility

The matter went smoothly. 'We had no problem with the competition authorities, because it is precisely market for market that our strengths are their weaknesses and vice versa,' confirms Henri Poupart-Lafarge, CEO of Alstom.

Alstom and Bombardier Transport 'have a long history of cooperation, particularly in France. They know each other and are less direct competitors than Alstom and Siemens,' confirms Bertrand Mouly-Aigrot. 'There is less duplication and more complementarities in your product and service portfolio.'

11,500 jobs and a dominant position in France

In France, Alstom takes over the countrys largest railway works in Crespin (North). The group will employ around 11,500 people in France and generate sales of 3.2 billion euros - 30{7d3485657e94c2a51293ca186d4450b2f27c317aa7ee3509dac6c8bbf5461118} of which will be exported.

Since Alstom and Bombardier Transport have so far been virtually duopoly, their union will occupy a dominant position on the French market, on which only Siemens and the Spanish CAF have previously placed their products.

'Medium-sized players like CAF, (the Swiss) Stadler or (the Spanish) Talgo probably have a card to play as long as they can prove that they have some jobs in France,' says François Guénard.

Alstom blackmailed for employment

Because the French giant is often accused of abusing job blackmail to keep markets in France.

'Alstom must give up exploiting the vulnerability of politicians just to find the way of innovation and industrial achievement. Its engineers and workers deserve to win public contracts loyally,' said Mobilettre in this context.

A new player must also enter the French market, the Czech group Skoda Transportation is negotiating the purchase of the Alsatian factory Reichshoffen, which Alstom has promised to sell in order to get the green light from Brussels and which it could develop in Western Europe.

The buyer will continue the series of Regiolis, trains that are popular in the regions.

A promising bundling of R&D.

After completion on Friday, the integration of Bombardier Transportation will actually begin on Monday, which will be 'day zero' according to a spokesman.

'There are two problems to be solved,' notes Bertrand Mouly-Aigrot: 'Restore Bombardiers operating performance and profitability, and successfully integrate the new unit.'

Bombardier Transportation is having trouble meeting the deadlines and costs for certain contracts in Germany, Canada or Switzerland.

Beyond these difficulties, analysts expect much from pooling research and development resources. Overall, 'there should be an interesting surface for innovations,' summarizes Carole Pezzali, consultant at Wavestone.