"The two businesses are largely complementary in terms of activities and geographies," the companies said.
Siemens will receive newly issued shares in the combined company representing 50% of Alstom's share capital, the statement said.
The combined company will be listed in France, with group headquarters in Paris. The Mobility Solutions business will be located in Berlin, Germany. In total, the new entity will have 62,300 employees in over 60 countries, the companies said.
Joe Kaeser, chief executive of Siemens said: "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. This will give our customers around the world a more innovative and more competitive portfolio."
The global marketplace has changed significantly over the last few years, Kaeser said.
"A dominant player in Asia has changed global market dynamics and digitalisation will impact the future of mobility. Together, we can offer more choices and will be driving this transformation for our customers, employees and shareholders in a responsible and sustainable way," Kaeser said.
The new entity will have an order backlog of €61.2 billion, revenue of €15.3 billion, an adjusted EBIT of €1.2 billion and an adjusted EBIT-margin of 8%, the companies said.
The French government has approved the deal and will not exercise an option to buy 20% stake in Alstom.
Munich-based mergers expert Eike Fietz of Pinsent Masons, the law firm behind Out-Law.com said: "Joe Kaeser pointed diplomatically to the European idea. The simple truth is that over the last 15 years or so China has learnt from working on several generations of high-speed trains using German, French and Japanese technologies. The country now has its own, indigenous high-speed rail technology of the highest level and is leading in the global market place."
"The merger is absolutely necessary in order to keep Europe competitive and retain some technological leadership as well as jobs. Whether the transaction receives merger clearance from the European Commission, though, is critical and will largely depend on whether the Commission recognises the global situation or limits its approach to the European market. The latter view may be a little short-sighted, if in the long run we are interested in maintaining some level of competition," Fietz said.
Paris-based merger and competition expert Christoph Maurer, also of Pinsent Masons said: "Irrespective of who will lead the combined Alstom-Siemens entity in the end after its 'merger of equals' it is good to see that European answers can be found to the pressures of globalisation. Lessons for Franco-German cooperation can certainly be learned from past experience with Aventis or EADS."
In 2014 the French government extended its powers to allow it to block foreign takeovers of companies in the energy, transport, telecoms, water and health sectors, amid fears of a takeover of Alstom's energy operations by US company General Electric. The move extended a 2005 decree which allowed the government to veto foreign acquisitions of companies in the technology, defence and betting sectors.