Bombardier in talks to combine rail unit with rival, sources say

LONDON Bombardier Inc., the embattled Canadian train and plane maker, is exploring a combination of its rail business with French rival Alstom SA, according to people familiar with the matter.

The two companies have held preliminary talks about a rail deal in the past few months, said the people, who asked not to be identified because the discussions are private. Representatives for Alstom and Bombardier declined to comment.

Bombardier rose as much as 4.9 per cent in trading in Toronto on Tuesday.

The shares closed up 5.74 per cent.

The latest considerations between Bombardier and Alstom could face antitrust scrutiny, and there’s no certainty they will lead to a transaction, the people said. A rail deal is among several options the Canadian company is exploring to stabilize its portfolio, which also includes business jets, they said.

The deliberations started before Bombardier shocked the market last week by warning of disappointing fourth-quarter sales, according to the people. Bombardier also said at the time that it may exit a joint venture with Airbus SE that makes the A220 jetliner and potentially take a major writedown. Bombardier shares dropped as much as 39 per cent on the news, a record decline.

A takeover of Bombardier’s rail business by Alstom would mark the latest attempt by some of the world’s biggest trainmakers to counter growing competition from China. Bombardier in 2017 held talks to combine its rail operations with competitor Siemens AG until the German company suddenly opted to pursue a deal with Alstom.

The European Union then in February 2019 blocked the Franco- German merger, which would have created a European rail champion.

While historically best known as a manufacturer of metro, commuter and regional trains, Bombardier has collaborated in high-speed projects including Alstom’s high-speed TGV.

The potential end of Bombardier’s involvement in A220 manufacturing, combined with new stumbles in the company’s rail business, have undermined a once-great name in manufacturing — just when investors thought they were poised to reap the rewards of a difficult turnaround effort.