Bombardier urged to watch for mergers
MONTREAL Bombardier should be “on alert” for merger opportunities that will enable its transportation unit to compete with larger rivals in an industry that is consolidating to help reduce costs, the chief executive of its biggest independent shareholder said on Wednesday.
“I think, in an industry that’s consolidating to the degree that it is and given the scale issues associated with the size of the Chinese presence in that industry, the company needs to be always alert to M&A opportunities,” Caisse de depot et Placement du Quebec CEO Michael Sabia told reporters.
Germany’s Siemens AG last September opted to merge its rail business with France’s Alstom SA instead of Bombardier’s rail unit, leaving Bombardier facing a challenge to compete in a market dominated by China’s state-owned CRRC, the world’s largest train maker, and the combined Siemens and Alstom group.
Sabia was speaking after Canada’s second-biggest public pension plan reported a 9.3-per-cent return on its clients’ funds in 2017, helped by a strong performance from its equities investments.
The Caisse, which invests on behalf of workers and retirees in Quebec, has a near 30-per-cent stake in Bombardier’s rail division, which has a $33-billion backlog and reported strong earnings last week.
However, earlier this month, it missed out on a contract to provide rail cars for one of the world’s biggest light rail systems in Montreal, a project led and financed by the Caisse, its largest independent shareholder. Ontario transit agency Metrolinx also cut its vehicle order from Bombardier following a dispute over Bombardier’s ability to fulfil its contract in Toronto.
“The core challenge (for Bombardier) is improving execution,” Sabia said.
The Caisse also has a 2.5-percent stake in the parent company.
The Caisse said its net assets totalled $299 billion at the end of 2017, up from $271 billion a year earlier. The fund has become one of the world’s biggest investors in infrastructure and real estate.