Bombardier Inc. has turned down an offer to buy up to 100 per cent of its rail division from China's Beijing Infrastructure Investment Co., according to a report from Reuters.
Reuters said it has seen an Aug. 14 letter in which the Chinese state-owned firm, which operates 18 metro lines in Beijing, offered to buy 60 to 100 per cent of the rail unit.
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Louis Veronneau, Bombardier's vice-president for mergers and acquisitions, replied in another letter that the company wasn't interested in selling a majority stake.
Bombardier Transportation is one of the world's largest suppliers of subway, streetcar and other rail equipment for mass transit systems and accounts for about half the parent company's overall business.
The Quebec company has been under pressure to sell off part of its successful rail division to improve value to shareholders. Its stock has been beaten down for the past four years as the aerospace division puts millions of dollars into developing the CSeries jet, without creating a product that can go to market.
Bombardier stock was at $3.65 this time last year, but today opened at about $1.29.
The report that it had an offer from a Chinese buyer sent shareins soaring more than 22 per cent in heavy trading Wednesday
Bombardier shares closed up 27 cents at $1.46 on the Toronto Stock Exchange. Volume of 34.5 million shares, more than three times the issue's daily average, made it by far the most active issue on Canada's main index.
The rail division is attractive to the Chinese, as the country invests billions in its own infrastructure.
Bombardier has won several significant projects in China in the past year, including a $ 381 million US contract with China Railway Corp. to supply 15 high-speed trains and four contracts valued at $136 million US to provide propulsion and control equipment for the Beijing Mass Transit Railway.
Chinese partners are eager to gain control of new technology in the rail sector and become bigger players in selling rail equipment to the world.
Bombardier has said it is considering spinning off part of its rail division into a separate listing to raise cash.