Bombardier has announced a strategic decision to focus exclusively on business aviation and plans to accelerate its deleveraging through the sale of its rail business.
“Going forward, we will focus all our capital, energy and resources on accelerating growth and driving margin expansion in our market-leading $7.0bn business aircraft franchise,” said Alain Bellemare, President and Chief Executive Officer, Bombardier Inc. “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 SA and the Caisse de dépôt et placement du Québec (“la Caisse”) 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 $8.2b (€7.45bn).
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 $6.4bn, subject to upward adjustments of up to $440mn. After deducting la Caisse’s equity position between $2.1bn and $2.3bn,
Bombardier would receive net proceeds of between $4.2 to $4.5bn, including $550mn of Alstom shares for a fixed subscription price of €47.50, monetizable after a three-month lock-up post-closing, subject to closing adjustments, indemnities and the euro to dollar 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,” continued Bellemare. “Including expected proceeds from previously announced transactions, Bombardier would have between $6.5bn and $7.0bn of pro forma1 cash on hand, putting the Company on a brand-new footing to address its $9.3bn of debt.”
The signing of the MOU has been unanimously approved by each of Bombardier and Alstom’s board of directors, and the transaction announced today 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, their mission to provide the world’s most efficient mobility solutions, their commitment to technology and their focus on sustainability will serve our customers well. They also appreciate and value our technology and capabilities. Above all, they recognize our talented and passionate employees and the great work they have done,” Bellemare stated.
About Bombardier Aviation
Bombardier Aviation is a market-leading, $7.0bn business, with demonstrated performance and a clear path for growth, margin expansion and solid cash generation. For more than 30 years, Bombardier has designed, built and supported one of the largest installed bases in business jet history, which today stands at more than 4,800 aircraft. It is powered by a proud heritage, a commitment to exceptional customer service and more than 18,000 talented and passionate employees1.
Business jet deliveries are expected to grow significantly, driven by the large cabin segment. Underlying this growth, is continued global economic growth, the further expansion of charter and fractional ownership business models, and a replacement cycle supported by newer and more efficient aircraft.