France’s Alstom said it had agreed to buy the train division of Canada’s Bombardier for up to 6.2 billion euros ($6.7 billion), in the latest bid by Western rail companies to bulk up in the face of Chinese competition.

Alstom, the maker of TGV bullet trains that speed between French cities such as Paris and Nice, said it would pay a mix of cash and new shares for the deal, adding the combined businesses were complementary geographically.

 Alstom shares fell on Tuesday after the French firm agreed to buy the rail division of Canada’s Bombardier for up to 6.2 billion euros ($6.7 billion), in a deal likely to be scrutinised by regulators and unions. Alstom shares were down 4.4 per cent in early session trading.

“We believe shares will now remain range bound amid the capital increase and uncertainty during a lengthy anti-trust process,” wrote analysts at JP Morgan, which cut its rating on Alstom to “neutral” from “overweight”.

The agreement between Alstom and Bombardier would unite companies with an estimated $17 billion in combined revenue.

A combination with Bombardier would give Alstom a share of between 40 per cent and 60 per cent of the European regional train market, according to estimates cited by union sources in France, well above Siemens at 10 per cent to 20 per cent.

Some analysts have said there could be less opposition to a deal this time as Alstom and Bombardier have a lower combined European market share in high-speed rail and signalling. The companies have informally briefed EU antitrust regulators on the deal, sources familiar with the matter said. Rail firms are trying to build scale to compete with China’s CRRC Corp, the world’s largest train maker, but they also face potential antitrust hurdles.

Alstom was blocked last year by European regulators from merging with Germany’s Siemens, while a previous flirtation between Siemens and debt-laden Bombardier to combine some train businesses fell apart in 2017.

The French government, which had criticised the EU’s veto on the Siemens merger, immediately welcomed the transaction.

“This deal will allow Alstom to prepare for the future, against the backdrop of increasingly intense international competition,” Finance Minister Bruno Le Maire said in a statement, adding he was due to discuss it with the EU’s antitrust boss Margrethe Vestager on Tuesday.

The companies said they expected the deal to close in the first half of 2021, after clearance from regulators.

Under the terms of the transaction, one of the Bombardier division’s shareholders, Canadian pension fund Caisse de depot et placement du Quebec, will become the lead investor in Alstom with an 18 per cent stake.

Agencies