September 6, 2018 / 2:32 PM / in 15 days

Siemens, Alstom still expect rail merger in H1 2019, despite Australian concerns

ZURICH (Reuters) - Siemens and Alstom on Thursday said they were confident their rail merger would still go ahead and be completed on time despite objections raised by Australia’s competition watchdog.

The headquarters of Siemens AG is seen before the company's annual news conference in Munich, Germany, November 9, 2017. REUTERS/Michael Dalder

The Australian Competition and Consumer Commission (ACCC) said on Wednesday it was concerned the mega merger could lead to higher prices by lowering competition for heavy rail signaling projects in the country.

Siemens and Alstom’s plan to create a Franco-German rail champion has also raised concerns in Europe, where the European Union’s anti-trust regulator has opened a full-scale investigation.

The two companies are looking to the deal to stave off the competitive threat from bigger Chinese rival CRRC (China Railway Rolling Stock Corporation) and Canada’s Bombardier Transportation.

Siemens and Alstom said on Thursday that such a statement by the Australian authorities was common with proposed mergers of such a scale, and it did not prejudice the final outcome of their deliberations.

“We will continue to work closely and constructively with the ACCC to explain the rationale and the benefits of the proposed combination, as well as the complex dynamics of the relevant markets and the reasons why the proposed combination will not substantially lessen competition,” a joint statement from the two companies said.

“Siemens and Alstom look forward to continuing to work cooperatively with the ACCC and confirm that the transaction is still expected to close in the first half of 2019.”

German industrial group Siemens and French rival Alstom announced the planned rail merger in September last year, an industrial boost for French President Emmanuel Macron which, however, has triggered criticism from opposition politicians.

Paris said the tie-up would protect jobs but critics fear loss of control of the French iconic TGV high-speed train. The combined TGV and Siemens’ ICE-high-speed trains, and signaling and rail technology would have 15.3 billion euros in turnover.

Daniel Cunliffe, an analyst at Liberum, said the concerns raised in Australia were fully expected and unlikely to derail the merger in Australia or elsewhere.

“Ultimately this is well within the time frame that Siemens and Alstom have communicated, so I don’t think this is going to throw a spanner in the ointment,” he said.

“There is time to offer concessions to satisfy the Australian authorities,” he said, with companies in similar situations offering to make localized sales or promising action to satisfy competition fears.

Globally, he expected the deal to go through because of increased political will for it to succeed in France and Germany.

“When you get two of Europe’s major train manufacturers in the face of increased global competition, especially from China, it makes 100 percent sense to be able to complete on a global scale,” Cunliffe said.

Reporting by John Revill; editing by Brenna Hughes Neghaiwi and Kirsten Donovan

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