China's train makers hit the road to promote merger to global investors

The nation's top two makers of rolling stock are holding a global roadshow this week to explain their merger plan and profit outlook to international and domestic investors.

The one-week event will have "four or five" stops in cities such as Hong Kong, London and New York, sources at the State-owned companies said.

The merger of CNR Corp and CSR Corp will go to shareholders for approval in March. In the all-share deal, CSR will issue new stocks to existing CNR shareholders to absorb the other company. The new entity will be called China Railway Rolling Stock Corp Ltd, or CRRC Corp. The combination will end an era in which the companies often cut into each other's profit in the global market.

Ahead of the roadshow, the companies announced contracts worth more than 40 billion yuan ($6.4 billion) involving domestic and foreign companies.

CNR Corp said in a statement to the Shanghai Stock Exchange on Sunday that it had signed 24.3 billion yuan worth of contracts with 30 customers involving high-speed trains, subways and electric vehicles. The total amount of the deals was equivalent to 25 percent of the company's 2013 revenue, the statement said.

CNR Corp won a $570 million contract to supply passenger cars to Boston's subway system last year, Chinese manufacturers' first US rolling stock order.

At the same time, CSR Corp has announced several major contracts totaling 21.1 billion yuan, the equivalent of 21.6 percent of the company's revenue in 2013. The deals included a 5.8 billion yuan contract to supply high-speed rail cars to the China Railway Corp, another contract worth 3 billion yuan to supply locomotives to local railway bureaus and 8 billion yuan in deals with the subway operators of Guangzhou, Shanghai and Tianjin.

China Railway Corp replaced the ministry of railways in 2013.

Li Kun, deputy director of the National Development and Reform Commission's transportation research institute, said the merger would result in a stronger industry chain and lower operating costs.

"The new company will have an edge over others in winning overseas orders and improving efficiency in the use of resources," he said. "It will also be effective at each segment of the industrial chain, including innovation, production and supply chain utilization and sales."

He said that China's urban rail transit network is on a fast track under the government's push for a massive railway and subway network.

As of Dec 31, China had 110,000 kilometers of track in operation.

Both companies have yet to win rolling stock contracts in the European market since the region has mature manufacturers and stringent requirements for market entry.