Bombardier closes sale of Transportation business
- January 31, 2021
Alstom’s headquarters in the Americas will be Bombardier’s Montréal compound, which will lead all operations in the region. Alstom will also establish a centre of excellence for design and engineering that will “build on Québec’s well-established strengths in innovation and sustainable mobility.”
After the deduction of “debt-like items and transferred liabilities” Bombardier will pocket about US$6 billion. However, after deducting the $2.5 billion equity position of investor la Caisse de dépôt et placement du Québec equity position, as well as some transaction costs, and then including monetary adjustments and obligations, Bombardier’s net proceeds will be far less, about $3.6 billion. Considering that at the end of 2020 Bombardier’s debt sat at US$4.7 billion, there is still plenty of work ahead to fix what’s left of the company.
“With this transaction now complete, Bombardier begins an exciting new chapter focused exclusively on designing, building and servicing the world’s best business jets,” said Éric Martel, president and CEO of Bombardier Inc. “With an unmatched product portfolio, a world class customer services network and incredibly talented employees, we have a strong foundation to build upon as we use the proceeds from the transaction to begin addressing our balance sheet challenges through debt paydown.”
The company says the proceeds from the transaction were lower than previous estimates as a result of the transportation division’s lower-than-expected cash generation in the fourth quarter due in part to unfavorable market conditions, as well as disagreements as to certain adjustments, which Bombardier intends to challenge.
Alstom, based in Paris, France, plans to gain about US485$million in cost synergies on annual run rate basis by the fifth year. Alstom will also sell some assets of the combined Group
For Alstom, the deal results in a truly massive transportation company with unparalleled commercial reach. Aside from well-established markets in France, Italy, Spain, India, South East Asia, Northern Africa and Brazil, the Bombardier Transportation deal will make Alstom the main competitor in the United-Kingdom, Germany, Scandinavia, China, and North America, with a particularly strong presence in Europe and North America, which represents approximately 75 per cent of the OEM market. The company will use this newly acquired installed base to rapidly grow its services offering.