CHINESE RIVAL PROMPTS RAIL TALKS

Bombardier, Siemens said to discuss merger

and are in talks to combine their rail operations, according to people familiar with the matter, potentially creating a business that could better fend off increasing competition from China.

The proposed joint venture, which could be worth at least 10 billion euros (US$10.6 billion), would merge the firms’ train-making and signalling activities, said the people, asking not to be identified because the discussions are private. A deal could come by the middle of the year, one of the people said.

No final decisions have been made and any combination would require clearance from antitrust authorities and face potential opposition from unions, they said. Representatives for Siemens, which has headquarters in Munich, and Montreal-based Bombardier declined to comment.

Combining the Bombardier and Siemens businesses would create a rail powerhouse better able to rival industry leader CRRC Corp. of China, formed from a 2015 merger of the country’s two main regional train makers. CRRC has been snapping up contracts worldwide, aided by an ability to finance entire projects. The move would also help fend off challenges in Europe, which has become the fastest growing rail market as governments seek to ease crowded roads and reduce carbon emissions.

Talks between Bombardier and Siemens started earlier this year, the people said. Analysts from Societe Generale have valued Siemens’s mobility unit at about 7.2 billion euros, while Veritas Investment Research Corp. has said Bombardier’s 70 per cent stake in its transportation business is worth at least US$5 billion.