Raft of regulatory approvals pending; deal will create global rolling stock giant

Shareholders of CSR Corp and CNR Corp approved a proposed merger of the two companies on Monday, paving the way for the establishment of the world's largest maker of rolling stock with annual revenue of more than $30 billion.

All assets, liabilities, certifications, staff, contracts and other rights and obligations of the two companies will go to the new merged entity, both CSR and CNR said in separate announcements.

CNR holds 51.83 percent of its listed company, while HKSCC Nominees Ltd holds 17.39 percent and an investment subsidiary of the parent group holds 2.82 percent. The rest is held by parties including China's National Social Security Fund and China Construction Bank Corp.

CSR holds 56.48 percent of its listed company, while HKSCC Nominees Ltd holds 14.62 percent and the remaining shareholders have less than 1 percent.

The merger still requires approval by the China Securities Regulatory Commission, Hong Kong Exchanges and Clearing Ltd (which runs the city's stock exchange), Ministry of Commerce, overseas antitrust regulators and other agencies.

The merged company will be named China Railway Rolling Stock Corporation, and it will control the vast majority of the domestic market for rolling stock and urban transit rail cars.

CSR will issue new shares to CNR shareholders in exchange for their shares in CNR.

The State-owned Assets Supervision and Administration Commission will hold a controlling equity stake in the merged company.

The SASAC has approved the merger, the two companies announced last Thursday. Following that announcement, shares of CSR climbed about 7.6 percent and those of CNR increased by 8 percent on Friday.

Experts said that the merger will help the trainmakers become more competitive against rivals including France-based Alstom SA, Canada-based Bombardier Inc and Germany-based Siemens AG.

Zhang Cheng, an analyst with Changjiang Securities Co Ltd, said that the merger will promote the localization of the core components of railway equipment and avoid the wasted expense of duplicate research and development.

The merger will also reduce competition in the domestic and foreign markets, where the two companies have been cutting their bid prices to gain an edge.

CNR is China's largest railway equipment manufacturer with 2013 revenue of 96.8 billion yuan, while CSR is ranked the second-largest with revenue of 96.5 billion yuan.

Premier Li Keqiang mentioned in the annual Government Work Report last week that China will implement a "Made in China 2025 strategy".

Although he did not elaborate, experts said that his comments indicated the government's resolve to boost the nation's manufacturing industry. The new CRRC is expected to play a key role in that strategy.

Experts believe that there will be no major issue with the domestic antitrust authority, but approval will still be required in the European Union and United States.

lanlan@chinadaily.com.cn

(China Daily USA 03/10/2015 page13)