Alstom confirms talks are underway to buy Bombardier Transportation
), a potential $7 billion deal that could help it build scale in the increasingly competitive rail sector.
A source familiar with the matter had told Reuters on Sunday that Alstom was close to agreeing to buy Bombardier’s train business in a deal giving the unit a value of $7 billion on an enterprise basis combining equity and debt.Train makers are eyeing consolidation to reduce costs through scale and improve thin rolling stock margins as they face competition from CRRC.
European regulators had argued the Alstom-Siemens deal could have hurt competition and led to higher prices for consumers despite concessions made buy the companies. Deutsche Bank analysts said in a note that a takeover of Bombardier’s rail division would be accretive to Alstom’s earnings per share by around 17 percent.A deal would also follow Bombardier’s decision last week to sell off its stake in the A220 passenger jet program to Airbus and the Quebec government.
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