Two Leading Hong Kong Railways Merge

October 9, 2007 5:14 p.m. EST

Hong Kong (AHN) - Better service and lower fares are expected after two of Hong Kong's major railroad companies merged. On Tuesday, authorities approved a merger between the Kowloon-Canton Railway Corporation and the Mass Transit Railway Corporation (MTRC). Of the 308 million MTRC shareholders, 82 percent were in favor of the merger, which has seen the firm's stock price gain over 50 percent since the deal was announced in 2004.

The amalgamation of the two rail systems is expected to be completed before the year's end. A fare adjustment will take place on the first day of joint operations and is expected to benefit up to 2.8 million passengers per day. MTRC, meanwhile, pledged to hold any fare hikes until April 10, 2008.

Eva Cheng, Transport Housing Secretary of Hong Kong said, "The merger could create synergy and enhance economic effectiveness, ultimately to passengers' benefit. We welcome the extraordinary general meeting's vote to support this proposal."

With an expanded network, the new rail firm will be more competitive, China Daily quoted Lai Wai-shing, an independent stock market analyst, since it could take over KCRC's expansion of its Kowloon Southern Link and Shatin to Central Link.

The Hong Kong Special Administrative Region owns 75 percent of MTRC. Under the merger plan, MTRC will pay $49.5 billion HKD for KCRC's rail and other assets. A down-payment of $12 billion will made, followed by $750 million HKD annually for the next five decades.