I decided to fragment 11th Burma Rifles Battalion by air transport. I was hoping to create three small fragments to cover three bases in the Burma's interior.
Transports flew with a part of 11th Burma Rifles Battalion from Mandalay to nearby Magwe, thus creating the LCU fragment in Magwe. The fragment was put into Strat mode and ordered to go to Katha by rail.
You can see the fragment in this picture

Next turn, I was expecting to see the fragment in Katha. However, the fragment disappeared. Combat Events file had this message:
CHECKING TF FUEL
TF'S RETURN TO PORT
11th Burma Rifles Battalion sub units merging....
So, the fragment merged with its parent unit when the fragment was MOVING by rail through Mandalay, when 11th Burma Rifles Battalion is located.
I knew that the fragment will cross path with it parent in Mandalay, but I didn't know that merging would include fragments that pass through a base in Strategic mode.