MUNICH—Siemens AG Chief Executive Joe Kaeser said Thursday that
he recently met with the executive chairman of Bombardier Inc.,
adding that while Siemens is "well positioned" in the global train
industry, "definitely there is movement and consolidation in that
market going forward and we definitely will be very mindful of what
can be done there."
Both companies are among the world's largest makers of train
equipment and are jockeying for position amid consolidation in the
global rail industry.
However, Mr. Kaeser said he "did not discuss business" in his
recent meeting.
The Wall Street Journal reported Wednesday that representatives
of the two sides have held talks about potential linkups between
their rail operations. The discussions were said to be at an early
stage and a deal was far from guaranteed. Both companies' train
operations are based in Germany.
One of the people familiar with the matter said the two sides
last month agreed to assess synergies between their businesses.
This person said Mr. Kaeser assigned a team of senior employees who
handle mergers and acquisitions to spearhead the evaluation. A
spokesman for Siemens declined to comment on "market
speculation."
Bombardier is controlled by members of the Beaudoin family, who
are heirs to company founder Joseph-Armand Bombardier. Mr. Kaeser
said on a call with reporters Thursday that he met with the
"chairman of the Bombardier family," who he later clarified was
Executive Chairman Pierre Beaudoin.
A Bombardier executive, John Paul Macdonald, also confirmed that
a meeting took place between Mr. Kaeser and Mr. Beaudoin, but
declined to provide further details.
Montreal-based Bombardier on Thursday declined to discuss
possible partnerships for its train business. A Bombardier
spokesman on Wednesday said that the company was "looking at
industry consolidation, but there are no formal discussions" with
Siemens.
Bombardier representatives have also talked to other possible
partners, two of the people familiar with the talks said.
Analysts put a price tag of $5.1 billion on Bombardier's train
unit.
In May, Bombardier Chief Executive Alain Bellemare said he was
considering either a joint venture or partial sale of the rail
unit, in addition to a minority spinoff on the Frankfurt Stock
Exchange, but dismissed speculation that the entire rail business
was for sale.
The Bombardier spokesman said Wednesday that the company would
"evaluate other strategic opportunities."
Based on revenues, Siemens's train unit is about one-third
smaller than Bombardier's. The Canadian company's transportation
business posted revenue of $9.6 billion last year, while Siemens's
mobility division, which includes its rail businesses, reported
revenue of €7.2 billion ($8 billion) during the same period.
Siemens's rail business comprises about 85% of its mobility
division, according to a calculation by an analyst at J.P.
Morgan.
When Siemens reported third-quarter results for fiscal year 2015
on Thursday, the mobility division saw a surge in orders, helped by
a €1.6 billion long-term maintenance order for trains in Russia. At
the same time, overall profitability was down 28%.
Mr. Kaeser's talks took place against the backdrop of
consolidation in the global rail industry. China's two state-owned
train makers, CSR Corp. and China CNR Corp., merged last month to
become CRRC Corp. Just before the merger, the two companies had a
total market capitalization of around $127 billion, according to
S&P Capital IQ.
Earlier this year, the two government-controlled entities
considered a bid for Bombardier's train assets in an effort to
further increase their global presence, according to people
familiar with the matter. But CRRC said in late June that it had no
plans to buy Bombardier's train business.
Asia is the world's largest market for trains, with
rolling-stock sales averaging €28.4 billion over the past three
years, compared with €21.9 billion in Europe and €16.8 billion in
North America, according to rail consultancy SCI Verkehr.
Asian and West European train markets will grow the most in the
coming years, SCI predicts.
In an effort to better serve their home market, both CSR and CNC
have been making trains through joint ventures with Western
companies, including Siemens, Bombardier, General Electric Co. and
Alstom SA, according to Maria Leenan, chief executive at SCI.
GE, which is in the process of buying Alstom's energy business,
last year opted not to acquire the French industrial group's rail
division when the two companies negotiated a takeover by GE.
Siemens, which also bid for Alstom's energy operations last
year, at the time offered to trade its rail division to Alstom as
part of any future deal. Alstom rejected that offer but a
Siemens-Alstom train tie-up remains a possibility for both European
companies, analysts say, despite the GE-Alstom deal.
Ben Dummett and Archibald Preuschat contributed to this
article.
Write to Christopher Alessi at christopher.alessi@wsj.com and
Eyk Henning at eyk.henning@wsj.com
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