The Future of Bombardier

[Gino29]

https://www.cbc.ca/news/canada/mont...sion-to-french-multinational-alstom-1.5466377

 

[W. K. Lis]

Bombardier agrees $8.2 billion deal to sell rail unit to Alstom

From link.

PARIS/MONTREAL (Reuters) - Canada's Bombardier <BBDb.TO> said on Monday it had agreed to sell its rail division to France's Alstom <ALSO.PA> for an enterprise value of $8.2 billion (£6.31 billion), as it focuses purely on business aviation and pays down debt.

That price tag includes equity plus debt. The deal will be done majoritarily in cash, with a chunk paid in new Alstom shares, Bombardier and Alstom confirmed in separate statements.

Bombardier said it would be receiving net proceeds of between $4.2 and $4.5 billion, once it accounts for the portion that will go to Canadian pension fund manager Caisse de dépôt et placement du Québec, a 30% shareholder in the rail unit.

Caisse will become the biggest shareholder in Alstom following the deal, which is expected to close in the first half of 2021, Bombardier added.

The memorandum of understanding between Bombardier and Alstom was approved by both companies' boards.

 

[W. K. Lis]

Bombardier Announces its Strategic Decision to Focus on Business Aviation and its Intent to Accelerate Deleveraging through Sale of Transportation Division to Alstom

From link.

February 17, 2020 Montréal Bombardier Inc., Press Release

• Bombardier, a world leader in business aviation, is well-positioned to compete in the business jet market
• Alstom to acquire Bombardier Transportation at an Enterprise Value of $8.2 billion (EUR 7.45 billion)
• Transaction will retire la Caisse’s participation in Bombardier Transportation (BT), la Caisse to become largest shareholder of Alstom
• Following adjustments for liabilities, net of BT cash, and la Caisse’s interest, expected net proceeds between $4.2 and 4.5 billion will reshape capital structure
• Closing expected first half of 2021, subject to customary regulatory approvals

All amounts in this press release are in U.S. dollars unless otherwise indicated. Amounts in EUR are converted to USD at an 1.1 exchange rate.

Bombardier (TSX: BBD.B) today 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.

 

[W. K. Lis]

Acquisition of Bombardier Transportation: accelerating Alstom’s strategic roadmap

From link.

• A step-change acquisition to address the ever-increasing demand for sustainable mobility
• Excellent strategic rationale bringing to Alstom:
  - Strong commercial and product complementarities
  - Strengthened product lines and strategic industrial capacity
  - Leading portfolio offering and R&D capabilities
• Acquisition price from €5.8bn to €6.2bn
• CDPQ to become the largest shareholder of Alstom with c.18% of the capital

17 February 2020 – Alstom announces today that it has signed a Memorandum of Understanding with Bombardier Inc. and Caisse de dépôt et placement du Québec (“CDPQ”) in view of the acquisition of Bombardier Transportation. Post-transaction, Alstom will have a backlog of around €75bn and revenues around €15.5bn[1]. The price for the acquisition of 100% of Bombardier Transportation shares will be €5.8bn to €6.2bn[2] which will be paid via a mix of cash and new Alstom shares. CDPQ will reinvest c.€2bn corresponding to 100% of cash proceeds to be received from the sale of its stake in Bombardier Transportation and further invest €0.7bn[3] in Alstom, outlining its strong belief in the strategic rationale and value creation potential of the combination.
“I’m very proud to announce the acquisition of Bombardier Transportation, which is a unique opportunity to strengthen our global position on the booming mobility market. 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. We are deeply committed to step up the turnaround of Bombardier Transportation activities and deliver significant value to all stakeholders, particularly our customers. We will also further develop Bombardier Transportation’s historical presence in Québec, drawing on Québec’s well-established strengths in innovation and sustainable mobility. We are pleased to welcome CDPQ as a new long-term shareholder. CDPQ is fully supportive of the transaction and Alstom’s strategy.” said Henri Poupart-Lafarge, Chairman and CEO of Alstom.

A step-change acquisition
Alstom and Bombardier operate in a very positive market environment with passenger traffic expected to grow between 3% to 5% annually over the 2015-2025 period and global rail OEM market expected to achieve a +3.0% CAGR between 2021-2023[4]. The dynamic is driven by urbanisation trend and a strong push for decarbonation of mobility. In Europe, the European Commission has set very ambitious targets in terms of CO2 reduction and several countries have announced large investments in rail.
Alstom is a preeminent rail equipment player with an industry-record backlog of €40bn and €8.1bn of annual sales as of 31-Mar-2019. Over the period 2016-2019[5], Alstom delivered strong sales development with an average annual growth of 5.5% outperforming the market, and significantly improved profitability (up to 7.5% adjusted EBIT margin).
Bombardier Transportation is a reference player in global rail transportation with a €32bn backlog and €7.4bn sales as of December 2019. With a track record of market leadership and a strong expertise, Bombardier Transportation offers a broad product portfolio across all market segments and has a well-balanced industrial footprint between best-cost and high-tech countries.
Post-transaction, Alstom will benefit from significant additional technologies and added R&D resources to consolidate its innovation leadership in sustainable mobility.
The group will also further develop its presence in Québec, Canada. After the transaction, Montréal will welcome the Headquarters of Alstom of the Americas, leading all Alstom operations and expansion in these geographies. 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.

CDPQ becoming a new long-term shareholder of Alstom
Pursuant to the terms of the acquisition, CDPQ (currently holding 32.5% of Bombardier Transportation), will become the largest shareholder of Alstom with approximately 18% of capital[7]. CDPQ is a highly regarded strategic investor with a long-term investment approach and has a significant and successful track record in the rail industry. It is fully supportive of the transaction and Alstom’s strategy. CDPQ will reinvest its proceeds for c.€2.0bn and realize an additional investment of €0.7bn in Alstom.
Bouygues will remain an important shareholder of Alstom with around 10% of capital[8]. It is fully supportive of the transaction and undertook to vote in favor of the transaction-related resolutions at the EGM.
For existing Alstom shareholders, the transaction is expected to deliver significant value and they will be offered the possibility to accompany Alstom in the financing of this strategic acquisition through a rights issue, subject to EGM approval.

 

[lenaitch]

I have heard their next step is to sell off their remaining biz jet division and concentrate all their efforts in their Whining for Government Handouts Division.

 

[Admiral Beez]

I have heard their next step is to sell off their remaining biz jet division and concentrate all their efforts in their Whining for Government Handouts Division.

Ha. But seriously, they must be mad, if any economic downturn occurs, the first thing that goes is the corporate jet. My guess is before the end of this decade the BBR business jets, or a segment such as Learjet (producing only one model from the early 2010s and new projects now canceled) is sold off to again pay down debts incurred from some other harebrained scheme.

 

[W. K. Lis]

Ha. But seriously, they must be mad, if any economic downturn occurs, the first thing that goes is the corporate jet. My guess is before the end of this decade the BBR business jets, or a segment such as Learjet (producing only one model from the early 2010s and new projects now canceled) is sold off to again pay down debts incurred from some other harebrained scheme.

That's why Doug Ford, Jason Kenney, and whoever the next Conservative leader at Parliament Hill will be, are giving out all those corporate tax breaks. So that the CEO's will still be able to use the corporate jet.

 

[CityStay]

I have heard their next step is to sell off their remaining biz jet division and concentrate all their efforts in their Whining for Government Handouts Division.

Or they could call themselves GM or Ford or Chrysler or Toyota and get all the handouts they want. Forever.
No whining necessary!

 

[CityStay]

Ha. But seriously, they must be mad, if any economic downturn occurs, the first thing that goes is the corporate jet. My guess is before the end of this decade the BBR business jets, or a segment such as Learjet (producing only one model from the early 2010s and new projects now canceled) is sold off to again pay down debts incurred from some other harebrained scheme.

Yeah, harebrained schemes like designing the best new airliner of the 21st century from the ground up.
Their only mistake was doing it in Canada, land of lumberjacks, hole diggers and condo flippers.
Avro discovered that the hard way 60 years ago.

 

[Admiral Beez]

Yeah, harebrained schemes like designing the best new airliner of the 21st century from the ground up.

Designing something leading edge but not getting it produced and to market has to be the definition of harebrained. Even worse was selling the lot for a handful of beans to your competition. And that‘s the rub with Bombardier, they take taxpayer handouts in the guise of needing public funds to stave off foreign competitors, but they then proceed to sell the same tax-supported divisions to the same competition.

 

[CityStay]

Designing something leading edge but not getting it produced and to market has to be the definition of harebrained. Even worse was selling the lot for a handful of beans to your competition. And that‘s the rub with Bombardier, they take taxpayer handouts in the guise of needing public funds to stave off foreign competitors, but they then proceed to sell the same tax-supported divisions to the same competition.

True, it's a simple matter taking on Boeing and Airbus.
They should have been more Canadian about it, said "sorry" and offered to assemble wings for Dreamliners or a320s.
Or something.

 

[Admiral Beez]

True, it's a simple matter taking on Boeing and Airbus.

No, BBR, like Brazil's Embraer made its success in commercial aircraft by specifically NOT taking on Boeing and Airbus. Once both BBR and Embraer stepped out of their lanes, they were pushed to sell to Airbus (BBR) and Boeing (Embraer). But we needn't worry, those who own voting stock and the senior team at BBR will be taken care of.

Avro discovered that the hard way 60 years ago.

Avro wasn't Canadian, it was a wholly-owned subsidiary of Britain's Hawker Siddeley. Avro Canada's chief designer was also a Brit, James Floyd, transferred from Avro UK.

As for Bombardier's rail transportation unit, that was always a German-based operation, with two or three branch plants in Mexico/USA/Canada.

 

[Adjei]

Bombardier should have hired lobbyists from the so-called 'Canadian' auto industry, those guys are experts at hoovering up subsidies (and deflecting attention). We lost $3.5 billion on the GM/Chrysler bailout stock sale alone and that was on top of the 100s of millions of annual gifts we've been giving them for decades. These foreign owned branch plants suck up heaps of cash through programs like the 'Advanced Manufacturing Investment Strategy', 'Strategic Manufacturing Investment grants', the 'Next Generation Jobs Fund' and dozens of others while they keep closing plants and laying off employees. We made almost 3 million cars in 2000 and that has dropped to under 2 million in 2019. Were were the 6th largest auto manufacturer in the world in 2000 and are currently the 12th - and dropping.

These blood suckers get away with murder and nobody says a peep. I wouldn't be surprised if, when the last plant closes, we give them a $100 million 'Strategic Asset Mobility' grant to help offset their moving costs.

We're a country of hole diggers, tree cutters, animal herders and branch plant drones. We have to learn to stay in our lane.

 

[jje1000]

A bit sad, but not unexpected as nearly every governments has given Bombardier enough rope.

In the end, this means that Canada loses control of another strategic sector of its economy.

IMO, I think the governments should have been more forceful in forcing changes onto Bombardier in exchange for the bailouts.

 

[lenaitch]

No, BBR, like Brazil's Embraer made its success in commercial aircraft by specifically NOT taking on Boeing and Airbus. Once both BBR and Embraer stepped out of their lanes, they were pushed to sell to Airbus (BBR) and Boeing (Embraer). But we needn't worry, those who own voting stock and the senior team at BBR will be taken care of.
Avro wasn't Canadian, it was a wholly-owned subsidiary of Britain's Hawker Siddeley. Avro Canada's chief designer was also a Brit, James Floyd, transferred from Avro UK.

As for Bombardier's rail transportation unit, that was always a German-based operation, with two or three branch plants in Mexico/USA/Canada.

Ya I don't know enough about the commercial aircraft industry, but it seems BBD inherited a solid fleet of aircraft from Dehaviland in a niche market that they could compete in, then frittered it away. Once you try to break into the big leagues, they could have built a plane that flew on recycled paper, they had to know the knives would come out. I get that one role of government is to support potentially successful and strategic industries, but there are limits.