Bombardier confirmed Monday it has come to an agreement with Alstom to sell off its transportation unit to the French company, which includes its rail industry and train division, for an enterprise value of $8.2 billion (€7.45 billion).
“Going forward, we will focus all our capital, energy and resources on accelerating growth and driving margin expansion in our market-leading $7 billion business aircraft franchise,” said Bombardier President and CEO Alain Bellemare.
Under the transaction, Bombardier and the Caisse de dépôt et placement du Québec (CDPQ) will sell their interests in Bombardier Transportation to the French company. The CDPQ will become both the largest and a long-term shareholder of Alstom with 18 per cent of capital.
“We are confident that the sale of our rail business to Alstom is the right action for all stakeholders,” Bellemare stated. “Above all, they recognize our talented and passionate employees and the great work they have done.”
Alstom noted Monday it hopes to further develop its presence in Quebec, with Montreal becoming what it calls the headquarters of Alstom of the Americas.
“We are deeply committed to step up the turnaround of Bombardier Transportation activities and deliver significant value to all stakeholders,” said Henri Poupart-Lafarge, Alstom chairperson and CEO. “We will also further develop Bombardier Transportation’s historical presence in Quebec, drawing on Quebec’s well-established strengths in innovation and sustainable mobility.”
Rumours had been swirling for weeks around whether or not Bombardier, which is trying to reduce its heavy debt, would sell its train division.
The deal narrows Bombardier’s focus as the plane-and-train maker would commit itself solely to business jets.
This is the latest of many assets relinquished over the past five years by Bombardier’s CEO, including the Q400 turboprop aircraft, CRJ regional jets and the former C-Series.
Nevertheless, any deal is expected to come under intense scrutiny from antitrust regulators in the European Union.
Last year, EU authorities blocked a proposed merger between Alstom and the train division of German industrial conglomerate Siemens AG, arguing the proposed tie-up would result in higher price tags on signalling systems and bullet trains.
The Quebec company has been dragging a long-term debt of US $9.3 billion and had announced last month that it was studying options to accelerate its deleveraging.
Unlike the aeronautics division, Bombardier Transportation’s head office is located in Berlin, Germany — making it much less present in Quebec.
It has 40,650 employees worldwide with 1,000 people at the La Pocatière plant in Bas-Saint-Laurent, as well as in Saint-Bruno, on the south shore of Montreal.
In a statement Monday, the Confédération des syndicats nationaux (CSN) argued it is up to the Quebec government to preserve jobs at its local facilities.
“It is unfortunate to witness the deconstruction of a Quebec company, built by thousands of workers here,” said CSN president Jacques Létourneau. “The important thing today is that the government has to use its power to maintain jobs at La Pocatière…the government has all the right cards in hand to ensure the development of the railway construction sector in Quebec.”
The trade union federation is also urging Quebec Premier François Legault to speed up the process of several local public transit projects, including Montreal’s Réseau express métropolitain (REM).
Bombardier shares have fallen 70 per cent since July 2018, while Alstom’s have risen by more than 50 per cent over the past two years, including four per cent after markets opened Monday.
Closing on the deal is expected in the first half of 2021.