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MarketScreener Homepage  >  Equities  >  SHANGHAI STOCK EXCHANGE  >  CRRC Corporation Limited    601766   CNE100000CP9

CRRC CORPORATION LIMITED

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Alstom board to discuss buying Bombardier rail unit: sources

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02/12/2020 | 02:15pm EDT
The logo of Alstom is seen on the company's TGV high-speed train factory in Belfort

Alstom board will meet late on Wednesday to discuss buying Bombardier's rail unit, sources familiar with the matter said, and a media report said the French train maker had valued the business at just under $7 billion.

French TV station BFM reported on its website that Alstom was set to make a firm offer for Bombardier's Berlin-based rail division.

Three industry sources familiar with the talks said a deal would involve Alstom acquiring Bombardier's largest unit in terms of revenue, but cautioned an agreement was not finalized.

Bombardier shares were up almost 8% in afternoon trading.

Alstom and Bombardier declined to comment.

A deal would help Montreal-based Bombardier improve its financial footing. The company, which will report its results on Thursday, faces higher-than-expected-costs in its rail division and $9.7 billion in outstanding debt, according to Refinitiv data.

An acquisition would help Alstom compete more effectively against Chinese giant CRRC Corp and in the U.S. market, a fourth industry source said.

Desjardins analyst Benoit Poirier said in a note to clients that a $7 billion offer seemed high "considering recent operational challenges" in the rail unit.

A planned tie-up between Alstom and Germany's Siemens AG collapsed last year due to European regulatory concerns.

"After the failure of the Alstom-Siemens merger, (a deal) would be a good strategic rebound for Alstom," said a fourth source who was familiar with the French government’s thinking.

Bombardier's rail assets are heavy in lower-margin rolling stock which are less attractive for Alstom, the source noted, but the deal would still offer synergies.

Alstom had recently made a non-binding offer valuing the business at $7 billion and a new offer would be binding but worth less, BFM said.

Alstom would offer cash for Bombardier's 70% stake of its railway business and Alstom shares for the 30% held by Canadian pension fund manager Caisse de dépôt et placement du Québec, the report added.

Poirier of Desjardins said he assumed a value of $2.5 billion net of Caisse's stake in the division, but excluding "pension liabilities which could be significant."

Caisse, which acquired the stake for $1.5 billion in 2016, declined comment.

One of the industry sources told Reuters that several options were on the table, including Alstom raising capital and the Caisse becoming one of the French company's main shareholders with Bouygues, a French conglomerate that owns a 15% stake in Alstom.

Bombardier is also weighing a sale of either its business jet or rail division.

The company is leaning toward selling rail because it would resolve the need to buy back the Caisse's share at a high cost, the second industry source said.

Under their agreement, Bombardier could buy back Caisse's convertible shares at either the fair market value of its stake, or at a minimum 15% compounded annual return, whichever is higher.

Reuters reported last month that Bombardier had approached Alstom and Japan's Hitachi to find a merger partner for its rail business.

(Reporting by Maya Nikolaeva in Paris, Allison Lampert in Montreal and Arno Schuetze in Frankfurt. Additional reporting by Gwénaëlle Barzic in Beaufort and Michel Rose in Paris; Writing by Geert De Clercq; Editing by David Gregorio and Bernadette Baum)

By Maya Nikolaeva and Allison Lampert

Stocks mentioned in the article
ChangeLast1st jan.
ALSTOM -2.37% 37.56 Real-time Quote.-11.06%
BOMBARDIER INC. -10.78% 0.455 Delayed Quote.-73.58%
BOUYGUES -8.77% 28.31 Real-time Quote.-25.26%
CRRC CORPORATION LIMITED 4.94% 6.59 End-of-day quote.-12.04%
SIEMENS AG -4.93% 72.95 Delayed Quote.-37.40%
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Financials (CNY)
Sales 2019 231 B
EBIT 2019 17 061 M
Net income 2019 12 549 M
Finance 2019 426 M
Yield 2019 2,30%
P/E ratio 2019 15,3x
P/E ratio 2020 13,2x
EV / Sales2019 0,76x
EV / Sales2020 0,65x
Capitalization 177 B
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CRRC Corporation Limited Technical Analysis Chart | 601766 | CNE100000CP9 | MarketScreener
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Mean consensus OUTPERFORM
Number of Analysts 15
Average target price 8,79  CNY
Last Close Price 6,59  CNY
Spread / Highest target 68,4%
Spread / Average Target 33,4%
Spread / Lowest Target -18,5%
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Managers
NameTitle
Yong Cai Sun President, General Manager & Executive Director
Hua Long Liu Chairman
Hu Zhao Chairman-Supervisory Board
Zheng Li Chief Financial Officer & Chief Accountant
Qi Liang Lou Executive Director