Bombardier has closed the previously announced sale of its transportation business to Alstom, repositioning itself as a pure-play business jet company.
“With this transaction now complete, we begin an exciting new chapter focused exclusively on designing, building and servicing the world's best business jets,” says Éric Martel, president and CEO of Bombardier. “With an unmatched product portfolio, a world class customer services network and incredibly talented employees, we have a strong foundation to build upon as we use the proceeds from the transaction to begin addressing our balance sheet challenges through debt paydown.”
Proceeds from the transaction were lower than previous estimates as a result of Transportation's lower than expected cash generation in the fourth quarter due in part to unfavourable market conditions, as well as disagreements between the parties as to certain adjustments, which Bombardier intends to challenge.
Total proceeds to the vendors after the deduction of debt-like items and transferred liabilities are $6.0 billion. After deducting la Caisse de dépôt et placement du Québec equity position of $2.5 billion, transaction costs and including the impact from closing adjustments and obligations related to achieving a minimum cash balance at Bombardier Transportation at the end of 2020, Bombardier expects net proceeds of approximately $3.6 billion. This amount includes $488 million of cash from the redemption of equity and a $125 million loan reimbursement by Transportation, settled in conjunction with the transaction closing. Net proceeds also include approximately $600 million of Alstom shares (500 million euros representing 11.5 million shares for a fixed subscription price of 43.465 euros per share), monetisable starting in late April 2021.
Pro-forma net debt is approximately $4.7 billion, which includes long-term debt of $10.1 billion, net of $1.8 billion cash on hand at Bombardier Inc. (excluding Transportation) as of December 31, 2020, and the approximately $3.6 billion proceeds from the transportation sale. The company intends to deploy available proceeds from the sale of transportation towards debt paydown and continues to evaluate the most efficient debt reduction strategies.