Siemens has signed an agreement regarding the proposed combination of its mobility business, including its rail traction drive business, with Alstom.

The signing of the business combination agreement (BCA) follows the memorandum of understanding (MoU) signed by the two companies on 26 September last year.

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The latest transaction is set to bring together two major players in the railway market.

To be named Siemens Alstom, the combined group will be headquartered in Saint-Ouen, France.

“We have reached an important milestone on the way to building a new leader capable of tackling the challenges of tomorrow’s mobility.”

Alstom chairman and CEO Henri Poupart-Lafarge said: “With the signing of the BCA, we have reached an important milestone on the way to building a new leader capable of tackling the challenges of tomorrow’s mobility.

“Both companies are working diligently and in a very good spirit to progress towards closing. These first nominations illustrate the companies’ commitment to balance in the governance of the future company.”

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Both companies also announced the proposed leadership of the combined entity.

Siemens has proposed the nomination of its managing board member Roland Busch as chairman of Siemens Alstom’s Board of Directors.

The board of directors of the combined company will have 11 members, of whom six will be appointed by Siemens.

The transaction is subject to relevant regulatory approvals and shareholders’ approval and is expected to close by the end of this year.

It requires foreign investment clearance by the French Ministry for the Economy and Finance, as well as consent from the anti-trust authorities.

Siemens has already started the internal bifurcation of its mobility business from its other segments to carry out the combination with Alstom.

According to the latest annual statements of both the companies, the new entity is expected to have an order backlog of €61.2bn, revenue of €15.3bn and an adjusted EBIT of €1.2bn.