Bombardier surges on talk of jet deal

TORONTO Bombardier Inc. jumped on a Wall Street Journal report that the Canadian maker of planes and trains is in talks to sell its private-jet unit to Textron Inc. Shares of Textron also surged as analysts said a deal would strengthen its hand in the luxury-aircraft business.

The negotiations have been going on for several weeks, and the terms of the potential transaction are unclear, the Journal reported Tuesday, citing people familiar with the matter. There’s no guarantee that the discussions will result in any agreement, the newspaper said. Bombardier declined to comment. Textron didn’t immediately respond to a request for comment.

A deal would provide a welcome cash injection for debt-laden Bombardier while removing what was supposed to be a pillar of its future. Once a Canadian industrial champion, Bombardier has also been holding talks to combine its rail-equipment unit with France’s Alstom SA and is considering an exit from a joint venture with Airbus SE to make the A220 jetliner. Bombardier agreed last year to sell its regional-jet business to Mitsubishi Heavy Industries Ltd.

Sheila Kahyaoglu, an analyst at Jefferies, valued Bombardier’s private-jet business at US$6.7 billion. She said other makers of luxury aircraft would benefit from stronger pricing power if the Montreal-based company reached a deal with Textron, the maker of Cessna planes. “Given the market deliveries have been stagnant around the 650 unit mark, consolidation has always been a possibility,” Kahyaoglu said in a note. “We would assume consolidation would lead to increased price discipline.”

Bombardier jumped 17.7 per cent Tuesday, closing at $1.53 in Toronto. The shares fell 33 per cent this year through Monday, the worst drop on Canada’s S&P/TSX Composite Index, after Bombardier warned of disappointing fourth-quarter sales. The company also said it may exit the A220 program and warned of a possible writedown.

The company’s 7.85-per-cent bonds due 2027 climbed 1.3 cents to 97 cents on the dollar, yielding 8.5 per cent, according to Trace data. Textron rose 7.8 per cent to US$49.88 after advancing as much as 11 per cent, the most intraday in nine months.