According to a statement, the company based in Saint-Ouen, near Paris, will pay as little as EUR5.8 billion in the cash-and stock transaction outlined in a memorandum of understanding.
Alstom noted that the acquisition is likely to add to earnings per share within two years and generate as much as EUR400 million in annual savings for Alstom within five years.
Combining with Bombardier Transportation would make Alstom the clear number 2 in rail equipment and help it counter the industry leader, China's CRRC Corp, which is increasingly targeting global sales. Alstom is making a second attempt to bulk up, after a plan to merge with the rail unit of Germany's Siemens AG was blocked last year by the European Union on antitrust considerations.
Canadian pension fund Caisse de Depot et Placement du Quebec will become Alstom's biggest shareholder with an 18 per cent stake, after reinvesting its EUR2 billion holding in Bombardier Transportation and topping it up by EUR700 million.
The merged rail business would have annual sales of more than EUR15 billion, according to German consultancy SCI Verkehr, still well behind CRRC but comfortably ahead of Siemens and Japanese bullet train maker Hitachi Ltd, reports Bloomberg.
Montreal-based Bombardier has been offloading assets to pay down debt following a costly expansion of its commercial aviation business. The embattled transportation firm shocked the market last month by warning of disappointing fourth-quarter sales. Bombardier announced recently it will exit a venture with Airbus that builds the A220 jetliner to preserve cash.
'While it has been a demanding five-year turnaround journey, we're now landing Bombardier in a great place,' CEO Alain Bellemare told analysts on a call. A strengthened balance sheet 'positions us to compete and win in the business aviation market.'
A planned combination of Alstom and Bombardier's Berlin-based rail division would face close antitrust scrutiny, having a nearly 50 per cent share of the market for electric multiple units and a leading position in Europe's urban transport market, according to analysis by SCI Verkehr.
French Finance Minister Bruno Le Maire will discuss the plan with EU Competition Commissioner Margrethe Vestager, he said in a statement. The companies have discussed potential remedies to address antitrust concerns, people familiar with the matter have said.