Bombardier has made the strategic decision to focus exclusively on business aviation and plans to accelerate its deleveraging through the sale of its rail business.
“Today marks an exciting new chapter for Bombardier. 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,” says president and chief executive officer Alain Bellemare. “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 has signed a memorandum of understanding (MOU) with Alstom and the Caisse de dépôt et placement du Québec for the sale of its Transportation business to Alstom. Under the transaction, Bombardier and la Caisse will sell their interests in Bombardier Transportation to Alstom on the basis of an enterprise value of $8.2 billion. Total proceeds, after the deduction of debt-like items and transferred liabilities, including pension obligations, and net of BT cash, are expected to be approximately $6.4 billion, subject to upward adjustments of up to $440 million. After deducting la Caisse's equity position between $2.1 billion and $2.3 billion, Bombardier would receive net proceeds of between $4.2 to $4.5 billion, including $550 million of Alstom shares for a fixed subscription price of EUR 47.50, monetisable after a three-month lock-up post-closing, subject to closing adjustments, indemnities and the EUR to USD exchange rate. Bombardier intends to direct these proceeds towards debt paydown and will evaluate the most efficient debt reduction strategies.
The transaction recognises the significant value created at Transportation since the beginning of the turnaround.
“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,” continues Bellemare. “Including expected proceeds from previously announced transactions, Bombardier would have between $6.5 and $7.0 billion of pro forma cash on hand, putting the company on a brand-new footing to address its $9.3 billion of debt.” The signing of the MOU has been unanimously approved by each of Bombardier and Alstom's board of directors, and the transaction is fully supported by la Caisse, who will become a new long-term shareholder of Alstom.
“We are confident that the sale of our rail business to Alstom is the right action for all stakeholders. As a company, its mission to provide the world's most efficient mobility solutions, its commitment to technology and its focus on sustainability will serve our customers well. It also appreciates and values our technology and capabilities. Above all, it recognises our talented and passionate employees and the great work they have done,” he adds.
Having just completed a major product investment cycle, Bombardier boasts an aircraft product line-up that includes its flagship all new Global 7500, the Global 5500 and Global 6500, the Challenger 350 and Challenger 650, as well as the new Learjet 75 Liberty. The company has a $14.4 billion backlog, the largest in the industry, and for 2020, it expects to deliver 160 or more aircraft.
Bombardier plans major expansions to its service and support network, and is currently executing on this growth agenda through projects around the world, including new and expanded facilities in Singapore, London and Miami.