Bombardier shares up after report of rail merger talks with Germany’s Siemens

MONTREAL — Shares of Bombardier were up more than four per cent Tuesday following a report that the company and German-based Siemens AG are in talks to merge their train businesses.

Bloomberg, citing unnamed sources it said were familiar with the matter, reported that the proposed joint venture could be worth at least US$10.6 billion. Bombardier declined to comment and Siemens couldn’t immediately be reached. Such a deal would require approval from antitrust authorities and could face opposition from unions over concerns about potential job cuts.

Bombardier shares rose nine cents at $2.31 in late morning trading on the Toronto Stock Exchange. Last year, Bombardier completed the sale of a 30 per cent stake in its transportation business to Quebec pension fund manager Caisse de depot for US$1.5 billion as it faced financial challenges caused in part by railway delays and the development of the CSeries commercial aircraft and Global 7000 business jet.

Analyst Chris Murray of AltaCorp Capital says it’s not surprising that the two railway manufacturers would be talking about creating a European powerhouse that could compete with China Railway Rolling Stock Corp., a company that formed after the merger of two Chinese state-owned rail firms.

He said Bombardier is also likely talking to other industry players but doesn’t believe any transaction would be done on a hostile basis.

When the Caisse struck its deal in late 2015, Bombardier CEO Alain Bellemare said it would continue to look at potential strategic options to participate in the rail industry’s consolidation.