Bombardier Inc. will sell its Transportation business unit to Alstom SA in a cash and stock deal worth approximately $6.4 billion, and will proceed with a "strategic decision to focus exclusively on business aviation". The Bombardier Transportation business designs and build rolling stock, signaling and communication technology, and components and for urban and mainline rail systems.
The decision follows Bombardier's steady sell-off of its Commercial Aviation assets in the past year, capped by the recent decision to exit the joint-venture controlling its former C-Series commercial jet platform to Airbus SA.
The remaining Bombardier business aircraft business consists of the Global series of corporate jets, including the Global 5000 and Global 6000 short-range models; the long range Global 5500 and Global 6500; and the larger, and longer-range Global 7500 and Global 8500, the latter of which is still in development.
“Going forward, we will focus all our capital, energy and resources on accelerating growth and driving margin expansion in our market-leading, $7.0 billion business aircraft franchise," stated Alain Bellemare, president and CEO. "With a stronger balance sheet after the completion of this transaction, an industry-leading portfolio of products, a strong backlog, and a rapidly growing aftermarket business, we will compete in this market from a position of strength.”
The sale to Alstom includes an agreement with Caisse de Dépôt et Placement du Québec (an institutional investment fund that manages several public pension plans and insurance programs in Quebec) by which those two bodies will sell their interests in Bombardier Transportation to Alstom, establishing an enterprise value of $8.2 billion. Bombardier's share, after deducting debt and liabilities, including pension obligations, is expected to be approximately $6.4 billion, subject to upward adjustments of up to $440 million.
After deducting la Caisse’s equity position Bombardier would receive net proceeds of $4.2 to $4.5 billion, including $550 million of Alstom shares. Bombardier noted it will direct these proceeds toward debt paydown and will "evaluate the most efficient debt-reduction strategies."
“Selling the rail business will allow us to reshape and redefine our capital structure. Adding a substantial amount of cash to the balance sheet, and removing la Caisse preferred equity in Transportation, will change the game for Bombardier,” added Bellemare.
