Siemens and Alstom have signed a memorandum to combine Siemens' mobility business including its rail traction drives business, with Alstom.
The digital tech transaction brings together two players of the railway market which are largely complementary in terms of activities and geographies.
Siemens will receive newly issued shares in the combined company representing 50% of Alstom’s share capital on a fully diluted basis.
Joe Kaeser, president and CEO of Siemens AG, said: “This Franco-German merger of equals sends a strong signal in many ways.
“We put the European idea to work and together with our friends at Alstom, we are creating a new European champion in the rail industry for the long term.
“This will give our customers around the world a more innovative and more competitive portfolio.”
Based on information extracted from financial statements of Alstom and Siemens, the new entity will benefit from an order backlog of €61.2bn, revenue of €15.3bn, an adjusted EBIT of €1.2bn and an adjusted EBIT-margin of 8%.
In a combined setup, Siemens and Alstom expect to generate annual synergies of €470m latest in year four post-closing and targets net-cash at closing between €0.5bn to €1.0bn.
Global headquarters as well as the management team for rolling stock will be located in Paris area and the combined entity will remain listed in France.
Headquarters for the Mobility Solutions business will be located in Berlin, Germany. In total, the new entity will have 62,300 employees in over 60 countries.
Kaeser added: “The global market-place 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.
“Together, we can offer more choices and will be driving this transformation for our customers, employees and shareholders in a responsible and sustainable way.”
The businesses of the two companies are largely complementary. The combined entity will offer a significantly increased range of diversified product and solution offerings to meet multi-facetted, customer-specific needs, from cost-efficient mass-market platforms to high-end technologies.
The global footprint enables the merged company to access growth markets in Middle East and Africa, India, and Middle and South America where Alstom is present, and China, United States and Russia where Siemens is present.
According to Siemens, customers will significantly benefit from a well-balanced larger geographic footprint, a comprehensive portfolio offering and significant investment into digital services.
The combination of know-how and innovation power of both companies will drive crucial innovations, cost efficiency and faster response, which will allow the combined entity to better address customer needs.