MRT train supplier Alstom gets green light to acquire competitor Bombardier Transportation

Alstom said that the proposed deal would not reduce competition by any great degree.
Alstom said that the proposed deal would not reduce competition by any great degree.PHOTO: REUTERS

SINGAPORE - The competition watchdog has given the green light to French train maker Alstom's US$7 billion (S$9.6 billion) buyout of Bombardier Transportation.

Alstom and Bombardier are competitors here in supplying railway vehicles - including passenger carriages and infrastructure - for MRT lines. Alstom also produces MRT signalling systems while Bombardier does so for certain Light Rapid Transit lines.

The Competition and Consumer Commission of Singapore (CCCS) said on Friday (Aug 14) that the proposed transaction will not violate section 54 of the Competition Act, which prohibits mergers that result in a substantial lessening of competition within any market here.

It found that there is likely to be "sufficient competition" following the acquisition, as a number of suppliers had taken part in tenders over the past 10 years, some with winning and participation rates higher than or equal to those of Alstom and Bombardier Transportation.

The two firms are also "unlikely to be each other's closest competitor" and that while barriers to entry and expansion may be significant for other firms, they are less so for existing suppliers, it added.

"In this regard, existing suppliers and potential suppliers are likely to constrain the merged entity's ability to raise prices," said the CCCS.

The competition watchdog also found that Bombardier Transportation - a unit of Canadian firm Bombadier - has never won tenders to supply MRT signalling systems so does not have any share in this market.

In this regard, there will be no incremental increase in the firms' combined market share arising from the proposed transaction, it added.

The CCCS sought feedback from the public and stakeholders, including the Land Transport Authority (LTA), suppliers of MRT trains and signalling systems and operators of MRT lines, in May, shortly after it received an application from Alstom.

 
 

Alstom told the CCCS that the proposed deal would not reduce competition by any great degree, as the LTA - the primary customer for railway vehicles and signalling systems here - will be able to exercise "significant bargaining power".

It also noted that barriers to entry are "not overly high" and that there is a large number of global competitors that participate in open tenders called by the LTA.