PARIS/MONTREAL — Bombardier said on Monday it had agreed to sell its rail division to France’s Alstom for an enterprise value of $8.2 billion, as it focuses purely on business aviation and pays down debt.
That price tag includes equity plus debt. The deal will be done primarily in cash, with a chunk paid in new Alstom shares, Bombardier and Alstom confirmed in separate statements.
“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,” said said Alain Bellemare, President and Chief Executive Officer, Bombardier. “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.”
Bombardier said it would be receiving net proceeds of between $4.2 and $4.5 billion, once it accounts for the portion that will go to Canadian pension fund manager Caisse de dépôt et placement du Québec, a 30 per cent shareholder in the rail unit.
Caisse will become the biggest shareholder in Alstom following the deal, which is expected to close in the first half of 2021, Bombardier added.
“We are deeply committed to step up the turnaround of Bombardier Transportation activities and deliver significant value to all stakeholders, particularly our customers,” said Henri Poupart-Lafarge, Chairman and CEO of Alstom. “We will also further develop Bombardier Transportation’s historical presence in Québec, drawing on Québec’s well-established strengths in innovation and sustainable mobility. We are pleased to welcome CDPQ as a new long-term shareholder.”
After the transaction, Montréal will welcome the Alstom Americas’ headquarters, leading all Alstom operations and expansion in these geographies.
“In addition, drawing on Québec’s well-established strengths in innovation and sustainable mobility, Alstom will establish a centre of excellence for design and engineering, as well as high-tech R&D activities, which will notably be focused on developing sustainable mobility solutions,” the company said.
The memorandum of understanding between Bombardier and Alstom was approved by both companies’ boards. The deal is expected to close in the first half of 2021, subject to customary regulatory approvals.
(c) Thomson Reuters 2020 with files from Financial Post Staff