Bombardier investment has paid off for Quebec
MONTREAL • One of Bombardier Inc.’s most important backers is betting that the plane maker has room for additional gains even after posting this year’s thirdbest rally on the main Canadian stock index.
The shares will get a new boost as the C Series jet developed by Bombardier racks up new orders thanks to a joint venture with Airbus SE, Quebec Premier Philippe Couillard said in an interview. The province plans to hang onto its stake in Bombardier and the C Series, a single-aisle aircraft with all-new technology.
Bombardier’s gains are benefiting Quebec, which agreed to pump US$1 billion into the C Series almost three years ago as Couillard extended a lifeline to a program that suffered from cost overruns and busted deadlines. Quebec has a seat on the board of the C Series partnership, plus warrants giving it the right to buy as many as 100 million Bombardier shares at $2.21 apiece — less than half the current price.
“Quebec taxpayers have already made money,” Couillard said. “If you look at the exercise price of the warrants and the value of the shares today, most analysts expect the shares to go even higher.”
Bombardier’s widely traded Class B stock surged almost 70 per cent this year, one of the biggest gain on S&P/TSX Composite Index, which was little changed during that period. The stock advanced 2.2 per cent to close at $5.20 in Toronto on Friday. Canadian markets were closed Monday.
Quebec’s profit on the C Series investment currently stands at about $300 million on paper, Couillard said. The Montreal-based manufacturer, which also makes trains, has been buoyed by improving cash flow, a rebound in business-jet orders and the October deal with Airbus on the C Series.
The European plane maker is scheduled to assume control of the aircraft program July 1, with plans eventually to build the plane in the U.S. as well as Canada.
“The beauty of the Airbus partnership is that Bombardier now has the sales power and the global footprint,” Couillard said. “I’m pretty sure that new orders will be happening quite soon”
Lining up a deeppocketed investor such as Airbus was essential to ensure the future of the C Series, Couillard said.
“From the start we said there is no way this plane can be sold worldwide without a strategic partner,” he said. “There were only three choices, practically speaking: Airbus, Boeing and the Chinese.”