By Arno Schuetze and Allison Lampert
FRANKFURT/MONTREAL, July 21 (Reuters) - Canada's Bombardier BBDb.TO and Germany's Siemens SIEGn.DE are in the final stages of talks to combine their rail operations, several sources familiar with the matter said on Friday, in a deal that would give the two added heft to compete against Chinese rail giant CRRC 601766.SS .
The deal, which would create two separate joint ventures for their signalling and rolling-stock divisions, could be announced as early as August, the sources said.
Bombardier and Siemens declined to comment.
Siemens shares fell 2.2 percent while Bombardier was unchanged.
Siemens' supervisory board will discuss the matter at its meeting on Aug. 2, while Bombardier's board is expected to consider it next week, the sources said, adding that an announcement could come in early August. Bombardier is not expected to discuss the deal on its second-quarter earnings call on July 28.
No money would be exchanged as part of the deal, two of the sources said.
Under the agreement, Bombardier would take just over a 50 percent stake in the planned combination of the rolling stock operations, one source said. Siemens would take roughly an 80 percent stake in a joint venture in the higher-margin signalling technology, two of the sources said.
All of the sources, including one who talked to Reuters earlier in the week, spoke on condition of anonymity because the talks are confidential.
The companies have offered extensive job guarantees to get backing from the strong German labour side, two of the sources said.
Rail consolidation has been a trend over the last few years, as global companies seek to contain costs and Western companies struggle with the rising ambitions of China's state-backed CRRC at home and abroad.
Michael Sabia, chief executive officer of Caisse de depot et placement du Quebec, which owns a 30 percent stake in Bombardier Transportation, told Reuters in June that he supports rail consolidation in general "to begin levelling the market," given CRRC's size advantage.
"A larger entity has a leg up on smaller entities when you're looking at that kind of scale," he said in an interview in New York. "We think that there's value creation associated with that (consolidation)."
During the interview, Sabia would not comment about a possible tie-up between Bombardier and Siemens, and a spokesman for the Caisse, Canada's second largest pension fund, was not immediately available for comment on Friday.
Media reports about Siemens and Bombardier exploring a joint venture surfaced in April. Analysts warned at the time that a combined company with total sales of $16 billion would face antitrust concerns in Europe. Also, both companies might not agree on who would get a controlling stake in the venture, analysts said.
The current potential deal addresses those concerns because control is divided through the two joint ventures.
Two of the sources said Bombardier and Siemens would have to sell off some high-speed train operations to address the antitrust concerns.
Bombardier, Siemens and French rival Alstom (PA:ALSO) have talked to each other about combining their businesses in various arrangements over the past years. This would be the third attempt by Siemens and Bombardier, one of the people said.
The advisers for Siemens are Goldman Sachs (NYSE:GS) and BNP Paribas (PA:BNPP), and UBS for Bombardier. The banks declined to comment or were not immediately available for comment.