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. Total proceeds, after the deduction of debt-like items and transferred liabilities 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 and $4.5 billion. 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,” said Alain Bellemare, president and CEO of Bombardier Inc. “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, 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.
“This acquisition will improve our global reach and our ability to respond to the ever-increasing need for sustainable mobility. Bombardier Transportation will bring to Alstom complementary geographical presence and industrial footprint in growing markets, as well as additional technological platforms. It will significantly increase our innovation capabilities to lead smart and green innovation. We will be thrilled to welcome all the talent and energy of Bombardier Transportation employees,” said Henri Poupart-Lafarge, Chairman and CEO of Alstom.
Alstom will also further develop its presence in Québec. After the transaction, Montréal will welcome the headquarters of Alstom of the Americas, leading all Alstom operations and expansion in the region In addition, drawing on Québec’s well-established strengths in innovation and sustainable mobility, Alstom will establish a centre of excellence for design and engineering, as well as high-tech R&D activities, which will notably be focused on developing sustainable mobility solutions.
The transaction will also be subject to clearance from relevant regulatory authorities and anti-trust authorities. Closing is expected in the first half of 2021.