Siemens, Alstom agree to merge rail operations

German industrial group Siemens and French competitor Alstom announced yesterday they've agreed to merge their rail operations.

Under the memorandum of understanding, Siemens would receive newly issued shares in the combined company representing 50 percent of Alstom's share capital on a fully diluted basis, according to a jointly issue press release.

The merged company will be called Siemens Alstom, with headquarters based in Germany and rolling stock based in France. Alstom Chief Executive Officer Henri Poupart-LaFarge will be CEO of the new entity.

"Thanks to its global reach across all continents, its scale, its technological know-how and its unique positioning on digital transportation, the combination of Alstom and Siemens Mobility will bring to its customers and ultimately to all citizens smarter and more efficient systems to meet mobility challenges of cities and countries," said Poupart-LaFarge.

The companies have combined sales of 15.3 billion euros (about $18 billion) before interest and tax of 1.2 billion euros (about $1.4 billion).

"This [merger] will give our customers around the world a more innovative and more competitive portfolio," said Siemens AG President and Chief Executive Officer Joe Kaeser. "The global marketplace has changed significantly over the last few years. A dominant player in Asia has changed global market dynamics and digitalization will impact the future of mobility."

The new company will benefit from an order backlog of 61.2 billion euros (about $72 billion) and will target synergies of 470 million euros (about $551.5 million) four years at the latest after the deal is closed, which is expected at the end of 2018. Siemens Alstom will employ 62,300 people.