German conglomerate Siemens are to merge their mobility business with French rail company Alstom.
The Memorandum of Understanding (MoU) brings together two businesses that Alstom describes as "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.
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 Siemens Alstom business will be located in Berlin, Germany. In total, the new entity will have 62,300 employees in over 60 countries.
The new firm has an order backlog of €61.2bn, with a €15.3bn revenue, an adjusted earnings before interest and taxes (EBIT) of €1.2bn and an adjusted EBIT-margin of 8%, based on information from the last annual financial statements of Alstom and Siemens.
Siemens and Alstom expect to generate annual synergies of €470 million latest in year four post-closing and targets net-cash at closing between €500m to €1bn.
The new firm hopes 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.
The Board of Directors of the combined group will consist of 11 members and will be comprised of six directors designated by Siemens, including the Chairman and four independent directors.
Henri Poupart-Lafarge, Alstom chief executive will be chief executive of Siemens Alstom.
Jochen Eickholt, CEO of Siemens Mobility will have a "important responsibility" in the merged entity.
Joe Kaeser (pictured), President of Siemens, said: "The global marketplace has changed significantly over the last few years. A dominant player in Asia has changed global market dynamics and digitalisation will impact the future of mobility.
"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."
Henri Poupart-Lafarge, chief executive of Alstom, said: "By combining Siemens Mobility’s experienced teams, complementary geographies and innovative expertise with ours, the new entity will create value for customers, employees and shareholders."
The merger is expected to be finalised by the end of 2018. The project is subject to clearance from regulatory authorities.
Image: Joe Kaeser (Siemens)