TRANSPORT
Bombardier selling majority stake in its train unit
MONTREAL It’s the end of the line for Bombardier’s five-decade run as a trainmaker.
Bombardier on Monday agreed to sell its majority stake in its train unit to France’s Alstom SA in a proposed transaction that values the business at about US$8.2 billion. Proceeds will go toward paying down the Montreal-based company’s $9.3 billion of longterm debt, Bombardier said.
Closing is expected to take place in the first half of 2021, the companies said.
The deal will see the Caisse de dépôt et placement du Québec become Alstom’s biggest shareholder by converting its minority Bombardier Transportation holding into shares of the acquirer and making an additional investment of 700 million euros ($1 billion).
As a result, the Caisse will own about 18 per cent of Alstom and control two board seats.
“It is a transformational deal for Bombardier,” chief executive Alain Bellemare said Monday on a conference call with financial analysts.
“It marks the end of our turnaround, and the beginning of a new and bright chapter for the company. It really changes the game for us.
“It positions Bombardier to accelerate our deleveraging.”
The transaction — the biggest divestiture in Bombardier history — caps a dizzying drive by Bellemare to shrink a once-sprawling Quebec industrial icon. In 2014, the last full year before he became CEO, Bombardier had 73,800 employees and sales of US$20.1 billion.
In the last two years alone, Bellemare handed control of the C Series jet to Airbus SE, sold Toronto’s Downsview facility and the turboprop business, and agreed to sell the CRJ regional-jet program to Japan’s Mitsubishi Heavy Industries.
In November, he struck a deal to sell the aerostructures business to Spirit Aerosystems for about US$500 million.
The last two transactions are expected to close by June 30.
As a pure-play maker of business jets, Bombardier will have annual revenue of about US$7 billion and 18,000 employees.
The company had US$15.8 billion of revenue last year with a workforce of 60,400.
Bombardier’s biggest and priciest business jet, the Global 7500, is almost sold out through 2022, and the company has started taking orders for 2023, chief financial officer John Di Bert said in the call.
“We really like our business-aircraft business,” Bellemare said.
“We have a very solid base, and we see a significant opportunity for growth and margin expansion.”
Total proceeds of the sale, after the deduction of debt-like items and liabilities such as pension obligations, are expected to be about $6.4 billion, Bombardier said on Monday.
After deducting the Caisse’s equity position, which is worth as much as $2.3 billion, Bombardier would receive net proceeds of up to $4.5 billion, including $550 million of Alstom shares that will be “monetizable” after a three-month lock-up period following closing.
Alstom, like Bombardier, is one of the world’s biggest makers of rail equipment.
It had a backlog of 40 billion euros as of March 2019, and annual sales of 8.1 billion euros.
Both companies have tried to get bigger in recent years to fend off increased competition from Chinese railcar maker CRRC.
In 2017, Alstom and Bombardier held separate talks with Germany’s Siemens AG about combining their train operations. Siemens eventually chose to merge with Alstom, but European competition authorities rejected the deal a year ago.
This time around, Bellemare seems confident the transaction with Alstom will win antitrust approval.
“There’s a great fit between Alstom and BT,” he said on the call. “There’s very minimal overlap.”
Once the deal closes, Alstom’s head of the Americas will be based in Montreal, which will serve as the headquarters for the “activities developed in the Americas.”
It marks the end of our turnaround, and the beginning of a new and bright chapter for the company.