China train gi­ants mull Bom­bardier stake: re­port

China Daily (Canada) - - FRONT PAGE - By PAUL WELITZKIN in New York

China North Rail­way and China South Rail­way com­pa­nies re­port­edly are look­ing at ac­quir­ing a con­trol­ling stake in Bom­bardier Inc’s rail­way unit, but Canada could act to block a sale to gain po­lit­i­cal sup­port in the com­pany’s home prov­ince of Que­bec, ac­cord­ing to a for­mer Canadian diplo­mat in China.

Reuters quoted uniden­ti­fied sources on Wed­nes­day as say­ing that the Chi­nese rail com­pa­nies have held talks with Bom­bardier over the pur­chase of the com­pany’s train unit. Rep­re­sen­ta­tives of CNR and CSR told Reuters they had no knowl­edge of the mat­ter, and a spokesman for Bom­bardier, based in Mon­treal, de­clined to com­ment.

A pur­chase of Bom­bardier’s rail as­sets would “open the doors for the Chi­nese to all West­ern train mar­kets,” Reuters quoted one of the sources, which said it had di­rect knowl­edge of the sit­u­a­tion.

Bom­bardier an­nounced it “will ex­plore ini­tia­tives such as cer­tain busi­ness ac­tiv­i­ties’ po­ten­tial par­tic­i­pa­tion in in­dus­try con­sol­i­da­tion in or­der to re­duce debt” in its fourth quar­ter 2014 re­sults, David Ty­er­man, an an­a­lyst at Canac­cord Ge­nu­ity Group Inc in Toronto, said in an e-mail. “So it is will­ing to con­sider ac­tions (sale, joint ven­ture, etc.) to pay down debt and to im­prove the prospects for the units,” he wrote.

Charles Bur­ton, a for­mer Canadian diplo­mat in China who is now a pro­fes­sor of po­lit­i­cal science at Brock Uni­ver­sity in St. Catharines, On­tario, wrote in an e-mail that Bom­bardier en­joys an “iconic sta­tus’’ in its home prov­ince of Québec be­cause “it was the first FrenchCana­dian owned busi­ness to achieve sig­nif­i­cant in­ter­na­tional suc­cess’’ and its global op­er­a­tions are “a source of great pride for Québec na­tion­al­ists’’.

“For this rea­son the gov­ern­ment of Canada could well act to block the sale of Bom­bardier’s rail­way unit as a means to curry po­lit­i­cal sup­port for the Con­ser­va­tive Party in that prov­ince,” he added.

“The ne­go­ti­a­tions of the sale may in­volve com­mit­ments on the part of the for­eign pur­chaser to main­tain­ing the pres­ence of Bom­bardier’s rail op­er­a­tions in Canada. But it has proven hard for the gov­ern­ment of Canada to en­force th­ese com­mit­ments once the for­eign ac­qui­si­tion has taken place,” Bur­ton wrote.

“In the case of ma­jor Canadian ac­qui­si­tions by US Steel and CNOOC, the par­ent firms were un­able to main­tain the com­mit­ments made at the time of pur­chase when mar­ket con­di­tions ren­dered the Canadian as­sets less prof­itable af­ter the sale, re­sult­ing in their con­sol­i­da­tion out­side of Canada.”

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