New train giant makes market splash

Cui Dianguo (second from the left), chairman of China Railway Rolling Stock Corp Ltd, getting ready to ring the gong at the Shanghai Stock Exchange to mark the beginning of the merged company's share trading on Monday.[Photo/Xinhua]

CRRC chairman says merger process will be model for SOE reform

China Railway Rolling Stock Corp Ltd started trading on the Shanghai and Hong Kong bourses on Monday, becoming the world's biggest rail conglomerate in terms of market value and sales.

CRRC, a combination of previous rail giants CNR Corp and CSR Corp, saw its shares immediately surge 10.02 percent to 32.4 yuan ($5.22) on the Shanghai Stock Exchange, giving it a market capitalization of 742.5 billion yuan.

The H shares in Hong Kong eventually closed at HK$15.68 ($2.02), up more than 4.5 percent from the last trading day before its suspension.

Cui Dianguo, its chairman, said the merger had created a "model that can be replicated" in future marriages between State-owned companies.

"We completed the process according to international practices and laws and the regulations of the two markets, and have provided a practical model for others planning similar move," said Cui.

Knitting the two firms together has created the world's biggest rail conglomerate with around $36 billion in revenue, putting it ahead in value terms of its three biggest Western rivals－Germany-based Siemens AG, Canada's Bombardier Inc and French multinational Alstom's transportation equipment division.

CNR generated 104.3 billion yuan of revenue in 2014, while CSR reported sales of 119.7 billion yuan during the same period, according to their annual reports. They had exported their products to 84 countries and regions.

Experts expected the newly combined company to use the scale of its operations and increased profitability to become a world-leading provider of high-end railway equipment with multinational operations.

"Our products have already become competitive in many developed markets. Our next step is to consolidate on that and bring our equipment capability to the rest of the international mainstream market," said Cui.

CSR's A shares soared 407 percent and CNR's 364 percent between Dec 31, when the two announced the merger, and May 7 when they ceased individual trading. The benchmark Shanghai Composite Index gained about 30 percent during the same period.

The merger deal saw CSR issue shares to CNR's shareholders, at a swap ratio of one CNR share for 1.1 CSR shares. CNR then delisted in both Shanghai and Hong Kong.

The company added in a statement that the merger is also a significant step forward in China's reform of its State-owned enterprises and analysts now expect further consolidation to follow based on the CRRC model.

Cui was previously chairman of CNR, while Xi Guohua, the president of CNR, is the new entity's president. Zheng Changhong, the previous chairman of CSR, and Liu Hualong, its president, have both been appointed vice-chairmen of the new company.

Yu Weiping, the previous vice-president of CNR, is now vice-president of CRRC, with specific responsibility for overseas development.