Two HK rail companies to start merger talks

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Last updated at: (Beijing Time) Wednesday, February 25, 2004

Two HK rail companies to start merger talks

Hong Kong government announced on Tuesday that the MTR Corporation Limited (MTRC) and Kowloon-Canton Railway Corporation (KCRC) have been invited to start negotiations on a possible merger.

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Hong Kong government announced on Tuesday that the MTR Corporation Limited (MTRC) and Kowloon-Canton Railway Corporation (KCRC) have been invited to start negotiations on a possible merger.

The negotiations are to be conducted on the basis of the parameters set by the government of Hong Kong Special Administrative Region, a government spokesman said.

The two railway corporations have been given six months to conclude their negotiations. The government will then decide whether or not to proceed with the merger having regard to the outcome of the negotiations.

"We have examined carefully the pros and cons of a proposed merger. We believe that a merger of the two railway corporations could bring synergies and more effective utilization of resources for the two corporations," the spokesman said.

"We have hence invited the two railway corporations to commencenegotiations on a possible merger. To ensure that the public can benefit from the merger exercise, the government has set the framework for the negotiations," the spokesman said.

"While the government will incorporate proper safeguards and precautionary measures into the Operating Agreement or the governing legislation of the merged corporation to ensure proper regulation of its operation, a merged railway corporation would continue to face strong competition from other modes of public transport. The merged corporation would hence have to provide quality service at highly competitive fare levels in response to market force," the spokesman explained.

The Secretary for Financial Services and the Treasury, Frederick Ma, said that the government is currently holding about 76 percent of shares in MTRC and is the sole owner of KCRC. These assets belong to the people of Hong Kong. The government will participate in the merger discussions from the perspectives of thetransport policy and shareholders' interest.

With advice from the financial adviser, the government believesthat a merger will lead to an enhancement in value over the present situation in which the two corporations are valued as separate entities, said Ma.

The merger will also create a more financially robust company that will be more able to capitalize on the existing strengths of the two corporations to enhance its overall effectiveness. This will also bring about better future business prospects. The Administration believes that if MTRC and KCRC can successfully merge, one plus one will give a value greater than two, he added.

Source:Xinhua

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