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. Last Updated: 07/27/2016

Alstom Buys 1/4 of Train Firm

BloombergAlstom is making a $99 million down payment on Transmashholding.
French engineering giant Alstom said Tuesday that it agreed to acquire a 25 percent stake in the parent company of train maker Transmashholding for an undisclosed total amount.

Under the agreement, which will see Alstom buy a blocking stake in The Breakers Investments, the French company will help TMH modernize its facilities. Alstom and TMH will also create a 50-50 joint venture as part of a plan to develop new rolling stock for the Russian market.

At a news conference in Paris, Alstom CEO Patrick Kron said his company would make a down payment of 75 million euros ($99 million), with the rest of the price to be determined based on TMH's performance over the period from 2008 to 2012.

Kron called the agreement "a major event for Alstom and for French-Russian cooperation." Alstom signed a strategic partnership with TMH in October, under which it said it could take a blocking stake after completing due diligence.

The companies did not say from whom Alstom would buy the stake. Currently, 75 percent minus one share is held by companies controlled by the owners of Kuzbassrazrezugol, Iskander Makhmudov and Andrei Bokaryov, and the owners of Transgrupp AS.

Russian Railways, or RZD holds a blocking stake, and a spokesperson for the company said it was not selling its interest. TMH, which has annual sales of almost 2 billion euros ($2.65 billion) and employs more than 65,000 people, is RZD's largest supplier.

The state railways monopoly buys 1,000 locomotives per year, and the partnership with Alstom is aimed at fulfilling that demand, TMH chairman Andrei Bokanov said Tuesday.

The first new product to be aimed at Russia and Commonwealth of Independent States would be an electric locomotive due to be delivered by mid-2010, Alstom said in a statement.

The deal comes after RZD said in September that Canadian aerospace and transportation firm Bombardier had pulled out of talks to buy a stake in TMH. Bombardier said at the time that the asking price was too high; Ernst & Young valued the company at $2.9 billion, or $725 million for 25 percent.

Last week, a TMH spokesman said RZD had cut its orders from the company by 30 percent this year. RZD has confirmed that it reduced its orders, saying it had issues with production quality and that falling revenues had forced it to cut its investment program.