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Jul 21, 2017

Siemens, Bombardier close to deal on transportation tie-up: Report

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FRANKFURT/MONTREAL - Canada's Bombardier (BBDb.TO) and Germany's Siemens (SIEGn.DE) are in the final stages of talks to combine their rail operations, several sources familiar with the matter said on Friday, in a deal that would give the two added heft to compete against Chinese rail giant CRRC. 

The deal, which would create two separate joint ventures for their signaling and rolling-stock divisions, could be announced as early as August, the sources said.

Bombardier and Siemens declined to comment.

Siemens' supervisory board will discuss the matter at its meeting on Aug. 2, while Bombardier's board is expected to consider it next week, the sources said, adding that an announcement could come in early August. Bombardier is not expected to discuss the deal on its second-quarter earnings call on July 28.

Under the agreement, Bombardier would take a majority stake in the planned combination of the rolling stock operations, while Siemens would take the lead in a joint venture in signaling technology, the sources said. No money would be exchanged as part of the deal, one source said.

The companies have offered extensive job guarantees to get backing from the strong German labor side, two of the sources said.

Rail consolidation has been a trend over the last few years, as global companies seek to contain costs and Western companies struggle with the rising ambitions of China's state-backed CRRC at home and abroad.

Reports about Siemens and Bombardier exploring a joint venture surfaced in the media in April. Analysts warned at the time that a combined company with total sales of $16 billion would face antitrust concerns in Europe. Also, both companies might not agree on who would get a controlling stake in the venture, analysts said.

The current potential deal addresses those concerns because control is divided through the two joint ventures.

One source said Bombardier and Siemens would have to sell off some rolling stock, such as some high-speed trains operations, to address the antitrust concerns.

Bombardier, Siemens and French rival Alstom have talked to each other about combining their businesses in various arrangements over the past years. This would be the third attempt by Siemens and Bombardier, one of the people said.