Alstom shares rise on report of potential rail deal with Bombardier

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PARIS (Reuters) - Shares in French train manufacturer maker Alstom ALSO.PA jumped 2% on Wednesday, hitting their highest in almost two years, after a report of a potential approach by its Canadian peer Bombardier BBDb.TO to combine the firm's rail business.

Bloomberg said on Tuesday that the companies had held preliminary talks about a rail deal in the past few months, citing sources.

It added that a rail deal was only one option Bombardier was looking into as the firm, which last week warned its 2019 profits would be lower than expected, exits some of its underperforming businesses and shakes up its portfolio.

The company also makes planes.

Alstom and Bombardier declined to comment, as did French construction and telecoms group Bouygues, one of Alstom’s big shareholders.

Bombardier’s stock closed 5.7% higher on Tuesday. Alstom shares were up 1.7% at 0857GMT.

Trainmakers have explored various combinations in recent years, with the idea of creating larger industry champions to head off competition from Chinese firms.

Last year the European Union blocked a deal between Alstom and Germany's Siemens SIEGn.DE to merge their rail assets, highlighting some of the antitrust hurdles the sector faces.

EU regulators are in the midst of reviewing competition rules to take into account new factors such as digitalization and globalisation.

Writing by Sarah White, editing by Louise Heavens