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Polish Newag and Pesa could merge to gain commercial edge on new markets

polish-newag-and-pesa-could-merger-to-gain-commercial-edgePESA Bydgoszcz and Newag are leaders of the Polish rolling stock market, one of CEE’s most buoyant market in terms of acquisitions. Until now the local market has been fueled by a large number of train and tramway orders financed under EU’s Cohesion Fund. According to an analysis published by Gazeta Wyborcza, the total value of contracts won by the two companies during EU’s 2007-2014 financial exercise reaches PLN 4.5 bn (EUR 1 bn). However after 2023,  contracting authorities will no longer receive 85% financing from EU sources and the rolling stock acquisition activities are expected to be reduced. This new macro environment is raising the question as to whether a potential Pesa-Newag merger or a partnership for reaching competitive edge on new markets could be their next move.

Pesa’s plan is to increase the share of rolling stock exports from 30% now to 70% in a few years. Newag on the other hand will continue to compete on international markets as part of consortia with large international companies. According to Zbigniew Jakubas, the owner of Newag, Polish rolling stock manufacturers do not currently stand a chance when competing alone in large international tenders.

In in interview for the same publication, Tomasz Zaboklicki, Pesa President & CEO, admits that the low-price strategy adopted for the local market is affecting the financials of both companies, making them weak in the competition for international markets.  According to him, the risks both companies face are going bankrupt or being acquired. 

In the past the two companies have discussed about a potential merger, but failed to reach an agreement. “A merger between Pesa – Newag would be the best solution not only for us, but also for the Polish economy”, Żaboklicki says. The two companies have a similar product portfolio, manufacturing diesel, electric trains and locomotives. The two companies differ in terms of size and approach to business development, as Żaboklicki argues. Last year, Pesa’s revenues reached  PLN 3.4 billion zł revenue, while Newag’s were just over PLN 1 billion.

Reference: http://wyborcza.biz/

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