Published: Tue, February 18, 2020
Markets | By Otis Pena

Alstom nears deal to buy Bombardier's train unit

Alstom nears deal to buy Bombardier's train unit

Bombardier has been struggling with its aviation division although rail, including rolling stock and signalling, has been doing better.

The sale would mean the Quebec company, which was founded in Valcourt, Que., in 1942 as a snowmobile manufacturer, will focus its business on high-margin private jets.

The deal risks leaving Siemens out in the cold following several years of exploratory talks alongside Bombardier and Alstom on rail joint ventures. Including liabilities, the total deal is worth US$8.2 billion, according to Bombardier.

The reported deal with Alstom would come after Bombardier, which is carrying long-term debt of US$9.3 billion, announced last month it was studying its options to accelerate its deleveraging, or reducing debt by selling assets.

Quebec's pension fund manager, the Caisse de depot et placement du Quebec, has reportedly agreed to sell its 32.5 per cent stake to Alstom in return for a minority stake in the combined company, according to the sources quoted in the article.

Bombardier unloaded the last of its once-vast commercial aircraft business earlier this month, with an agreement to sell its remaining interest in the Airbus A220 passenger jet - the aerospace project once known as the C Series that almost bankrupted the company - to Airbus. The company expects to close the transaction in the first half of 2021, subject to regulatory and antitrust approval.

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On the conference call, Bellemare said the break fee for the transaction is "in the range of $75 million", to be paid by Alstom. "If there are some issues, they will much easier to solve than the one we had with Siemens".

The French government will make sure the acquisition of Bombardier's train business by Alstom creates value for the European rail industry and the staff of both companies, Finance Minister Bruno Le Maire said on Monday.

If the deal is completed, the new Alstom will have an order backlog of 75-billion euros and annual revenues of 15.5-billion euros, a near doubling of its current revenues.

"Bombardier Transportation will bring to Alstom complementary geographical presence and industrial footprint in growing markets, as well as additional technological platforms", said Henri Poupart-Lafarge, chairman and CEO of Alstom, in a press release.

Alstom said it will open an office in Montreal, which will become the new headquarter for Alstom of the Americas.

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