German industrial group Siemens has signed a memorandum of understanding (MoU) to combine its mobility and rail traction drive business with Alstom.

Under the terms of the MoU, Siemens will receive 50% of the newly issued shares in the combined company ‘Siemens Alstom’ that represents half of Alstom’s share capital on a fully diluted basis.

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According to the latest financial statements of the two companies, the combined entity will hold an order backlog of €61.2bn, revenues of €15.3bn and an adjusted EBIT of €1.2bn.

"Together with our friends at Alstom, we are creating a new European champion in the rail industry for the long-term."

Siemens president and CEO Joe Kaeser said: “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.”

The global headquarters and rolling stock management team of the new combined entity will be located in Paris, France, while the main office of the mobility solutions business will be situated in Berlin, Germany.

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With 62,300 employees in more than 60 countries, the combined entity is expected to offer a significantly increased portfolio and strengthen its presence across specific strongholds of Siemens and Alstom.

The board of directors of the combined group will have 11 members with six directors designated by Siemens, while Alstom chairman and CEO Henri Poupart-Lafarge will lead the new company.

Subject to various closing conditions and regulatory approvals, the transaction is expected to close by the end of next year.