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This file photo taken on April 6, 2017, shows the new Coradia Liner train of SNCF Intercites and train-building giant Alstom presented at the Gare de l'Est railway station in Paris. France's Alstom and Germany's Siemens have a merger deal ready to sign.

ERIC PIERMONT/AFP/Getty Images

A rail version of Europe's Airbus has been born and will put enormous pressure on Bombardier Inc.'s train division.

Directors at Siemens AG of Germany signed off on a deal Tuesday to merge its train unit with that of France's Alstom SA, creating what will be Europe's dominant rail business, with combined annual sales of about €15.3-billion ($22.3-billion).

Chances remained slim until late in the day that Canada's Bombardier could still play spoiler with its own proposal with Siemens, which was also considered by the German company's board. But the politics of a Franco-German industrial champion proved too difficult to overcome, as the French government, which controls 19.9 per cent of Alstom, threw its weight behind the merger.

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The new company, to be called Siemens Alstom, would be the world's second-largest train company after China's CRRC Corp.

The merger significantly narrows the strategic options of Bombardier Transportation (BT), as Bombardier's rail division is called, as it faces a corruption probe related to a $340-million (U.S.) contract in Azerbaijan.

BT has other potential merger partners, including Stadler Rail of Switzerland and Spain's Grupo CAF, but they are not as big and could require more legwork. Joining forces with a Japanese manufacturer is also possible.

"They do look like they would be the guy without a dance partner, and that would be difficult," Cormark Securities analyst David Tyerman said of Bombardier Transportation.

The launch of Siemens Alstom will be the equivalent of a land-bound Airbus, the European passenger-jet maker that is Boeing's main global rival.

The merger hits Bombardier with a hefty dose of bad news in the same week that its Montreal-based aerospace business faces a blow from the U.S. Commerce Department. On Tuesday the department was expected to issue a preliminary ruling on whether the Canadian company benefited from unfair subsidies on the sale of its C Series jet in the U.S. market. Boeing contends that Bombardier sold the C Series to Delta Air Lines at "absurdly low prices" while taking unfair government aid.

Both Bombardier and BT, whose headquarters are in Berlin, declined to comment Tuesday about the Siemens-Alstom deal and how it would affect the Canadian train maker. BT is 70-per-cent owned by Bombardier and 30 per cent by pension fund Caisse de dépôt et placement du Québec, which invested $1.5-billion (U.S.) into BT in 2015 as Bombardier was struggling to raise money to finance the C Series.

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All three European train makers have been circling one another for years as the Chinese threat intensified. BT insiders have said that competition from the new breed of Chinese train giants, which intend to become strong competitors in the European and North American markets, would force industry-wide consolidation among the French, German, Italian and Japanese train companies, a process that has already started. In 2015, Hitachi of Japan bought Italy's AnsaldoBreda, the maker of Italy's new generation of Bombardier-engineered high-speed trains.

Although there are other issues that could have swayed the Siemens board, politics is believed to be the strongest. As leaders in France and Germany articulated an ambition behind the scenes to create a truly European champion, pressure against a Siemens-Bombardier deal intensified in recent weeks, high-level sources confirmed.

Siemens and BT also have greater overlap, raising the likelihood of asset sales and job cuts that would not have pleased the French government or unions. A former BT senior manager who did not want to be identified said massive overlap in Germany between Siemens and BT was also a deal buster. "Everyone agrees that the European rail business needs restructuring, but forcing the German factories [of Siemens and BT] to bear the brunt of this restructuring would not be politically acceptable," he said.

Siemens will transfer its train and rail equipment business to Alstom in return for a 50-per-cent stake in the enlarged company, the manufacturers said in a joint statement. Alstom boss Henri Poupart-Lafarge will be the CEO of the new company, which will be based and listed in Paris. Siemens will name the chairman. A break fee of €140-million is in place. The companies still have to win anti-trust approval for the deal. It wasn't immediately clear how they would deal with current contracts they're working on with Bombardier, including the modernization of Montreal's metro system.

Siemens is best known as the maker of Germany's ICE high-speed inter-city trains, while Alstom makes the high-speed TGV trains that are a source of French pride. Siemens is also a strong player in signalling systems. Bombardier also makes high-speed trains but is better known for its commuter and light-rail trains.

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