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Shanghai eyes merging two big taxi firms

(Agencies)
Updated: 2008-10-06 15:19

The Shanghai government is considering merging two of the city's biggest taxi operators, Dazhong and Jinjiang, as it moves to consolidate the industry to cope with high fuel prices, government and industry sources familiar with the matter said.

The government is reviewing a variety of options to combine the taxi assets of Dazhong Transportation (Group) Co, Shanghai's largest taxi company, and smaller rival Jinjiang, controlled by China's biggest hotel operator, Jinjiang Group, the sources said on Monday.

Jinjiang Group, which owns Shanghai Jinjiang International Hotels Development -- operator of the Peace Hotel on the city's historic riverfront -- is controlled by the Shanghai government.

An industry source said a detailed merger plan had not been finalized but could be produced quickly if agreement can be reached among the managements of the two companies.

"The technical details of the merger have yet to be worked out. But things are moving very quickly and a final plan could be announced as early as this month," the source said.

An investor relations officer at Dazhong said she had no knowledge of the matter, while Jinjiang executives could not be reached for comment.

Dazhong, which operates a fleet of more than 9,000 taxis, mostly in Shanghai, has a market capitalisation of nearly 13 billion yuan ($1.90 billion). Jinjiang Group has a fleet of about 4,000 taxis in China's financial hub.

Earlier in the year, Dazhong, in which Credit Suisse holds a small stake, had explored a merger opportunity with Shanghai Haibo Co, another of the city's major taxi operators, but Haibo's parent group has no intention of divesting its taxi business, the industry source said. A Haibo representative could not be immediately reached for comment.

The Shanghai government is keen to consolidate its taxi services industry, which has become more vulnerable to fuel price volatility since the central government raised fuel prices by about 20 percent in June, the biggest one-off hike ever.

The municipal government was the key driver behind the scheduled merger of two other major taxi operators, Shanghai Qiangsheng Holding Co and Shanghai Bashi Industrial (Group), which have a combined fleet of about 13,000 taxis.

It also pushed the merger of about 20 small and medium-sized taxi operators in 2001 to create Blue Union.

Last month, the city government announced plans to restructure state-owned enterprises to reduce operating costs and improve management efficiency, although it gave no details.