Bombardier and Siemens 'in train deal talks'

Bombardier has built trains for London Underground

Shares in manufacturers Bombardier and Siemens have jumped on reports they are in talks about merging their train-making businesses.

Bombardier's shares rose nearly 7% on Tuesday while Siemens' shares hit a record high before easing back.

Talks between Bombardier, a major supplier of London Underground trains, and Siemens started earlier this year, according to media reports.

Analysts said a deal would help tackle growing competition from China.

The proposed merger would firmly establish the world's second biggest train maker, Reuters and Bloomberg reported.

It would also help Siemens and Bombardier compete with market leader, China's state-backed CRRC, they said.

The merged company would have joint sales of $16bn (£13bn), but the tie-up would face close scrutiny from competition regulators, Reuters reported.

Chinese competition

The impact from a deal would be felt beyond the Bombardier and Siemens' home markets of Canada and Germany respectively.

Bombardier's rail unit employs 3,500 staff in the UK and has built trains for operators including Greater Anglia, Scotrail and in London.

Siemens employs 700 train workers in the UK and its contracts include supplying Eurostar trains.

Siemens' high-speed trains are used by operators across Europe

RBC analyst Walter Spracklin said that although details were lacking, he viewed a combination of the two positively.

He pointed to shared expertise of industry leaders, potential cost savings and better competition against lower-cost Chinese companies that are "beginning to reach beyond their own borders".

Siemens and Bombardier have discussed a merger before, but are under pressure after consolidation elsewhere in the rail industry.

CRRC was created by combining China's two biggest players in 2015.

Bombardier shares rose 6.8% in Toronto on Tuesday, while Siemens shares rose 2.4% at one point before slipping back to finish 0.4% higher.

The BBC is yet to receive a comment from Siemens or Bombardier, but both firms declined to comment when contacted by news agencies.