FRANKFURT/PARIS — German industrial group Siemens (SIEGY.PK) and French rival Alstom (ALSMY.PK) agreed on Tuesday to merge their rail operations, creating a European giant to better withstand the international advance of Chinese state-owned CRRC.

The deal is a blow to Bombardier (BBDb.TO), which also held talks with Siemens, sources have said, and which faces a separate battle this week to protect jobs in Quebec and Northern Ireland.

Siemens will own 50 per cent of the joint venture, the companies said, while Alstom will supply Henri Poupart-Lafarge as chief executive, helping to counter criticism that France is giving up control of another national industrial icon.

Annual synergies are estimated at 470 million euros (US$554 million) in year four after the closing of the deal, a joint statement published on Alstom's website showed.

"This Franco-German merger of equals sends a strong signal in many ways. We put the European idea to work and together with our friends at Alstom, we are creating a new European champion in the rail industry for the long term," said Siemens CEO Joe Kaeser.

The Siemens and Alstom transport businesses, which span the French TGV and German ICE high-speed trains as well as signalling and rail technology, had combined sales of about 15 billion euros (US$18 billion) in their last fiscal years.