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Trainmakers seek delisting ahead of merger

Zhong Nan
Updated: May 12,2015 7:42 AM     China Daily

Locomotives made by China CSR Corp at a railyard in Zhuzhou, Hunan province. China CNR Corp and CSR Corp are now in the process of merging. They jointly submitted an application to the Shanghai Stock Exchange to terminate trading in their shares.[Photo/Xinhua]

Domestic train manufacturers China CNR Corp and CSR Corp on May 10 submitted an application to the Shanghai Stock Exchange to terminate trading in their shares, putting them on track in a merger process to create the world’s largest rail equipment conglomerate in terms of sales.

The two companies jointly announced the application for the withdrawal of CNR’s listing from the SSE, after gaining approval from the central government and foreign anti-monopoly agencies.

Under the arrangement, CSR will issue shares to CNR’s shareholders, with a swap ratio of one CNR share for 1.1 CSR share. CNR will delist from the Shanghai and Hong Kong stock markets.

Their announcements said the merger will be based on equal treatment, a long-term perspective and standard procedures. The new company will take over CSR and CNR’s assets, businesses, employees, contracts and technical qualifications, as well as debt and other obligations.

The State-owned railway rolling-stock producers, which are already the biggest in terms of sales in the world and currently have a combined market capitalization of $113 billion, said the schedule for share conversion will be specifically announced by the CSR after the termination of the two companies’ share trading.

The CNR and CSR announced merger plans last December and said they would rename the combined company-China Railway Rolling Stock Corp-to end the harmful price war between them in global markets and give the merged entity a clear edge over other global peers.

Luo Renjian, a researcher at the Institute of Transportation Research under the National Development and Reform Commission, said as the proportion of China’s State-owned enterprises is still higher than many other countries, the nation has been eager to accelerate SOE reforms to let them expand globally and become more innovative through mergers and acquisitions.

“Because the earning ability of China’s rail vehicle manufacturers is higher than other sectors such as the shipping, airline and energy industries, the government-led merger, therefore, is the country’s first move to reinvigorate its resource-rich State-owned sector,” said Luo.

China’s trainmakers exported equipment worth 26.77 billion yuan ($4.36 billion) in 2014, a year-on-year growth of 22.6 percent, according to the General Administration of Customs.

Zhi Luxun, deputy director-general of the department of foreign trade at the Ministry of Commerce, said even though the shift is still in its early stage, it will enable China to quicken its pace in promoting its railway standards abroad after the merger.

It will also support the new rail equipment maker in widening its global services and production networks to compete with more established rivals such as Siemens AG of Germany, France’s Alstom SA and Mitsubishi Corp of Japan in different regional markets.

To date, China has exported its railway technology to more than 30 countries and regions, including member countries of the Association of Southeast Asian Nations, Argentina, Australia and the United States.

The CNR and CSR discussed with Bombardier Inc on purchasing a controlling stake in the Canadian company’s railway unit last month, but the talks cannot progress until the merger process is completed.

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