Antitrust Law Daily EC clears Alstom’s acquisition of Bombardier, with conditions
Friday, July 31, 2020

EC clears Alstom’s acquisition of Bombardier, with conditions

By Peter Reap, J.D., LL.M.

The proposed combination of the global rail transportation companies raised serious concerns in rolling stock and signalling markets.

The European Commission (EC) approved, under the EU Merger Regulation, the acquisition of Bombardier Transportation by its global rail transportation competitor Alstom, it announced. The proposed combination raised serious concerns in rolling stock and signalling markets. The approval is conditional on full compliance with a commitments package offered by Alstom that includes divestitures by both of the companies.

The companies. Alstom, based in France, is active worldwide in the rail transport industry, offering a wide range of transport solutions (from high-speed trains to metros, trams, and e-buses) and related services, as well as products dedicated to signalling solutions, passengers and infrastructure, rail electrification systems, and digital mobility. Bombardier Transportation is the global rail solutions division of Bombardier, a diversified industrial group based in Canada with activities in the construction, property, telecoms and media sector. The companies compete in the manufacture and supply of very high speed, mainline and urban rolling stock(trains), and in mainline and urban signalling solutions that includesignalling systems, installed on railway tracks and on-board units (OBUs) that provide safety controls on mainline and urban rail networks.

EC investigation. The EC determined that the transaction, as initially notified, would have raised serious competition concerns in the following areas:

  1. Very high-speed rolling stock where the merged entity would have become the undisputed market leader with a significant market position;
  2. Mainline rolling stock where the merged entity would have strengthened the Parties' already large combined position in particular in France and Germany, and;
  3. Mainline signalling where the merged entity would have had the ability and the incentive to make it more difficult for other suppliers. Furthermore, the merger risked making the merged an unavoidable supplier of legacy OBUs in the Netherlands.

The investigation confirmed that the proposed transaction did not raise competition concerns in any other markets, in particular within mainline and urban signalling.

Proposed remedies. To address the EC’s concerns, Alstom offered a set of commitments:

  • The divestment of Bombardier's assets currently contributing to its joint very high-speed platform with Hitachi, the "Zefiro." Alstom also committed to a series of measures aimed at preserving the joint bid offered in consortium by Bombardier and Hitachi to HS2, the current largest opportunity for the production of very high-speed rolling stock in Europe;
  • The divestment of (a) Alstom's mainline Coradia Polyvalent platform, (b) Alstom's production facility located in Reichshoffen in France, (c) Bombardier's mainline Talent 3 platform, and (d) Bombardier's production facility located in Hennigsdorf in Germany;
  • The supply of legacy OBUs and necessary interfacing information and support, in favor of signalling competitors; and
  • The supply of legacy OBUs to the Dutch infrastructure manager, ProRail, in favor of all interested operators.

The final proposed commitments addressed the competition concerns identified by the Commission regarding the acquisition and were significantly improved following the feedback received by market participants, the EC observed. The Commission therefore concluded that the proposed transaction, as modified by the commitments, would raise no competition concerns. The decision is conditional upon full compliance with the commitments.

Vestager comments. EC Executive Vice-President Margrethe Vestager, in charge of competition policy, said: "Alstom and Bombardier are leading providers of state-of-the-art trains used every day by millions of passengers across the European Union. Thanks to the comprehensive remedies offered to solve the competition concerns in the areas of very high-speed, mainline trains and mainline signaling, the Commission has been able to speedily review and approve this transaction. Going forward, a stronger combined Alstom and Bombardier entity will emerge. At the same time, thanks to these remedies, the new company will also continue to be challenged in its core markets to the benefit of European customers and consumers."

Companies’ reaction. In a joint statement Alstom and Bombardier welcomed the EC’s decision for conditional clearance of the proposed acquisition of Bombardier Transportation by Alstom. They also noted that "[t]he transaction remains subject to further regulatory approvals in several other jurisdictions and customary closing conditions. Closing of the acquisition is expected for the first half of 2021." Alstom announced the deal to acquire Bombardier in February of this year.

Scuttled Siemens/Alstom merger. The EC approval of the Alstom/Bombardier combination comes almost 18 months after its February 6, 2019, announcement that it prohibited the proposed acquisition of Alstom by Siemens to protect competition in the European railway industry. The EC said that the merger would have harmed competition in markets for railway signaling systems and very high-speed trains. According to the EC, the transaction would have combined Siemens’ and Alstom’s transport equipment and service activities in a new company fully controlled by Siemens, bringing together the two largest suppliers of various types of railway and metro signaling systems, as well as of rolling stock in Europe.

Companies: Alston SA; Bombardier Transportation

MainStory: TopStory Antitrust AcquisitionsMergers GCNNews

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