An Innovia Monorail 300 train by Bombardier at the InnoTrans trade fair in Berlin

Bombardier rejects Chinese offer for rail business

Bombardier has turned down a Chinese offer to buy up to 100 per cent of its rail unit, documents seen by Reuters show.

The Canadian firm is reportedly looking to raise cash by listing a minority stake in its transport unit later this year to offset cost overruns at its aircraft business, but the possibility of a foreign takeover leading to job losses could expose it to political pressure as the Canadian economy slips into recession.

In an August 14 letter, Tian Zhenqing, chairman of Beijing Infrastructure Investment (BII), a government-owned company that operates 18 metro lines in China's capital, offered to acquire between 60 and 100 per cent of the business.

"BII and BT (Bombardier Transport) will have an incomparable synergetic relationship, and the combination will create a globalised world-class rail industrial group running the whole industrial chain," Tian wrote, adding he would keep management teams intact.

The letter said BII had gained "strong support" to complete the transaction from Chinese authorities, but Bombardier's vice president for mergers and acquisitions Louis Veronneau, who was copied in the non-binding offer, rejected the proposal in a letter to Tian one week later.

"We are not exploring a transaction involving a majority stake at this juncture," Veronneau wrote back on August 21.

The Chinese government has encouraged domestic firms to acquire leading foreign technology to grow their businesses and global footprint, but a source familiar with the company's thinking told Reuters that Bombardier is not keen to cede control of a key unit to a Chinese state-owned player.

The company is reportedly open to the idea of a strategic partner, but a deal with Chinese buyers would be complicated by Chinese state regulations, including those on money leaving the country.

"M&A transactions are always complicated to begin with and every time you do a deal with a Chinese investment group, it comes with a lot of approvals from both sides of the Pacific," the source said.

BII declined to comment.

In an emailed statement, Bombardier spokeswoman Isabelle Rondeau said: "We are exploring initiatives such as potential participation in industry consolidation, but we will not discuss our activities in this regard or speculate on potential outcomes."

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