MRT supplier Alstom gets green light to acquire competitor

Watchdog says $9.6b buyout of Bombardier Transportation won't lessen competition here

The Bukit Panjang LRT system is being overhauled by Bombardier Transportation, which French train-maker Alstom plans to buy. The two companies are competitors in supplying railway vehicles, including passenger carriages and infrastructure, for MRT li
The Bukit Panjang LRT system is being overhauled by Bombardier Transportation, which French train-maker Alstom plans to buy.ST PHOTO: MARK CHEONG

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 Transportation are competitors 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) on Friday said 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 local market.

It found 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 companies are also "unlikely to be each other's closest competitor", and 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.

It also found that Bombardier Transportation - a unit of Canadian company Bombardier - 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 companies' combined market share arising from the proposed transaction, it added.

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

Alstom told the CCCS the proposed deal would not reduce competition by any great degree as the LTA - the primary customer for railway vehicles and signalling systems - 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.

 
 
A version of this article appeared in the print edition of The Sunday Times on August 16, 2020, with the headline 'MRT supplier Alstom gets green light to acquire competitor'. Print Edition | Subscribe