China CNR Corp, one of the nation's two major train makers, agreed to acquire a 50 percent stake in a Shanghai rail traffic equipment maker as part of its strategy to cooperate in the urban rail transport equipment business.

CNR yesterday signed the deal to buy 44.79 percent equity in Shanghai Rail Traffic Equipment Development Co (SRTE) from Shanghai Electric Group for 365 million yuan (US$53.4 million). Additionally, CNR will inject capital of 85 million yuan that will result in the train maker owning half of SRTE.

Shanghai Electric said the cooperation with CNR in the urban rail transport equipment business will boost the expansion of SRTE in Shanghai's urban rail vehicle market and lead the firm to development opportunities and access to new markets at home and abroad.

"The acquisition could boost CNR's strategic plan to develop the urban rail business," China Jianyin Investment Securities analyst Zhen Yi said.

CNR, which has won contracts to supply bullet trains for the under-construction high-speed railway line between Shanghai and Beijing, now has less than 5 percent of its business from urban rail business, according to Zhen.

Shanghai Electric's holding in SRTE will be reduced to 34.91 percent on completion of the transaction, which is subject to regulatory approval. Shanghai Electric's controlling shareholder, Shanghai Electric (Group) Corp, will own the remaining 15.09 percent.

Founded in 2003, SRTE designs, manufactures, distributes and maintains urban mass transit equipment. Its consolidated assets totaled 734 million yuan at the end of September.

China's urban rail sector is expected to boast a total length of 4,500 kilometers by 2020.