Daily Management Review

Shares Come Crashing For Alstom Post Alstom-Bombardier Rail Deal Announcement


02/22/2020


Unions and regulators alike have shown their concern due to the recent rail deal development between Alstom and Bombardier wherein the former will possesses forty to sixty percent shares in regional train market.



On Tuesday, 18 February 2020, the French firm Alstom saw its shares crumbling down following its decision to purchase “the rail division of Canada’s Bombardier” at the price of “6.2 billion euros”. It is more likely that the said deal will not escape scrutiny of the unions and regulators.
 
The firm saw a drop of “4.4%” in the early hours of Tuesday itself. According to JP Morgan’s analysts, who cut Alstom’s rating to “neutral” from “overweight”:
“We believe shares will now remain range bound amid the capital increase and uncertainty during a lengthy anti-trust process”.
 
The Alstom-Bombardier agreement would combinedly generate an estimated revenue of “$17 billion”. Moreover, the former is also likely to get a share “between 40% and 60% of the European regional train market” which will place it well above the company of Siemens which holds between ten to twenty percent only.
 
Furthermore Reuters also reported that:
“Some analysts have said there could be less opposition to a deal this time as Alstom and Bombardier have a lower combined European market share in high-speed rail and signalling”.
 
If reports are to be believed both the companies have already brought the matter of deal to the knowledge of “EU antitrust regulators”. While, analysts from Credit Suisse added in their note wherein the company’s “neutral” rating has been maintained:
“Since the European Commission has just recently looked at the transportation end of the market at the back of the Siemens-Alstom deal, Alstom believes the (Commission) already holds good knowledge of the sector and therefore expects a quicker approval”.
 
As per a statement by the trade union of France, the said deal should not lead to “major job losses” in the country. On the other hand, the “IG Metall union” of Germany appealed to the government of Germany to scrutinise the deal along with the concerned raised by them. The union has stated that even if the EU gives green signal for the deal it “would not accept any consolidation at the expense of Germany”.
 
In fact, Deutsche Bahn, the German rail company owned by the state happens to be a “big customer of both firms”.Moreover, the head of Alstom, Poupart-Lafarge has informed that jobs will not be affected by the above mentioned acquisition while he expressed his confidence in “achieving antitrust approval”. Both the companies are expecting to seal the deal by the first half of coming 2021, while the deal would include “a 75 million-euro break fee”.
 
 
References:
reuters.com







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