Bombardier recently announced that it 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. 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,” said Alain Bellemare, President and Chief Executive Officer, Bombardier Inc.
Bombardier Transportation Sale Overview
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 $8.2 billion (EUR ~7.45 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, monetizable 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 recognizes 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 $6.5 and $7.0 billion of pro forma1 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 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, $7.0 billion business1, 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.
Having just completed a major product investment cycle, Bombardier boasts the best aircraft product line-up in the industry. Its flagship aircraft, the all new Global 7500, is the world’s largest, longest-range and most advanced business jet. In 2019, Bombardier also brought into service its new Global 5500 and Global 6500 aircraft with better than promised performance. Bombardier Aviation’s industry-leading portfolio of aircraft also includes the Challenger 350 and Challenger 650 aircraft, best-selling in their respective class, as well as the new Learjet 75 Liberty. With a $14.4 billion backlog, the largest in the industry, Bombardier is very well positioned to compete, win, grow, and create shareholder value. For 2020, Bombardier Aviation expects to deliver 160 or more aircraft.
Bombardier continues its commitment to exceptional customer service, having announced major expansions to its service and support network. The Company is currently executing on this growth agenda through projects around the world, including new and expanded facilities in Singapore, London and Miami.
Bombardier Aviation is headquartered in Montréal, Canada and has major operations in 16 countries around the world.
Memorandum of Understanding
Pursuant to the requirements of French law, Alstom and Bombardier will initiate Works Councils information and consultation procedures prior to the signing of the transaction documents. Accordingly, and consistent with customary practice in France, Alstom, Bombardier and la Caisse reached an agreement in principle on the main terms of the transaction and entered into a MOU prior to announcing the proposed transaction. The MOU organizes the information and consultation process by Bombardier and Alstom of their respective Works Councils and contains exclusive commitments by both parties. This process is anticipated to last for approximately four to five months.
Bombardier has retained Citigroup Global Markets Inc. and UBS Investment Bank as its financial advisors and Norton Rose Fulbright as its lead legal advisor, with Jones Day advising on antitrust and competition matters outside Canada. National Bank Financial and Rockefeller Capital Management are acting as financial advisors to Bombardier’s Board of Directors.