Mr. Alain Bellemare reports
BOMBARDIER ANNOUNCES ITS STRATEGIC DECISION TO FOCUS ON BUSINESS AVIATION AND ITS INTENT TO ACCELERATE DELEVERAGING THROUGH SALE OF TRANSPORTATION DIVISION TO ALSTOM
Bombardier Inc. has made the strategic decision to focus exclusively on business aviation and plans to accelerate its deleveraging through the sale of its rail business. All amounts in this press release are in U.S. dollars unless otherwise indicated. Amounts in euros are converted to U.S. dollars at a 1.1 exchange rate.
"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.
Bombardier Transportation sale overview
Bombardier has signed a memorandum of understanding (MOU) with Alstom SA and Caisse de depot et placement du Quebec for the sale of its transportation business to Alstom. Under the transaction, Bombardier and the Caisse will sell their interests in Bombardier Transportation to Alstom on the basis of an enterprise value of $8.2-billion (approximately 7.45 billion euros). Total proceeds, after the deduction of debtlike 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 the Caisse's equity position between $2.1-billion and $2.3-billion, Bombardier would receive net proceeds of between $4.2-billion to $4.5-billion, including $550-million of Alstom shares for a fixed subscription price of 47.50 euros, monetizable after a three-month lock-up postclosing, subject to closing adjustments, indemnities and the euro-to-U.S.-dollar exchange rate. Bombardier intends to direct these proceeds toward 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 Mr. Bellemare. "Including expected proceeds from previously announced transactions, Bombardier would have between $6.5-billion and $7.0-billion of pro forma (1) 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's and Alstom's board of directors, and the transaction announced today is fully supported by the Caisse, which 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," Mr. Bellemare stated.
About Bombardier Aviation
Bombardier Aviation is a market-leading, $7.0-billion business (1), 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 employees (1).
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 lineup 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, bestselling 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, increase 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 Montreal, 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 the Caisse reached an agreement in principle on the main terms of the transaction and entered into an 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 advisers and Norton Rose Fulbright as its lead legal adviser, with Jones Day advising on antitrust and competition matters outside Canada. National Bank Financial and Rockefeller Capital Management are acting as financial advisers to Bombardier's board of directors.
Investor webcast information
Bombardier will host a conference call for investors and financial analysts on Feb. 17, 2020, at 1:30 p.m. EST, to discuss the transaction and information contained in this press release. A live webcast of the call and relevant financial charts will be available at
the Bombardier investor relations website.
Stakeholders wishing to listen to the presentation and question-and-answer period by telephone may dial one of the following conference call numbers.
In English: 1-514-394-9320,
1-866-240-8954 (toll-free in North America) or
800-6578-9868 (overseas calls)
In French: 1-514-394-9316
(with translation), 1-888-791-1368 (toll-free in North America) or
800-6578-9868 (overseas calls)
A recording of the call will be available on Bombardier's website shortly after the end of the webcast.
About Bombardier Inc.
With over 60,000 employees across two business segments, Bombardier is a global leader in the transportation industry, creating innovative and game-changing planes and trains. Its products and services provide world-class transportation experiences that set new standards in passenger comfort, energy efficiency, reliability and safety.
Headquartered in Montreal, Canada, Bombardier has production and engineering sites in over 25 countries across the segments of aviation and transportation. In the fiscal year ended Dec. 31, 2019, Bombardier posted revenues of $15.8-billion.
(1) Pro forma includes the sale of transportation and the closing of previously announced transactions. Pro forma cash on hand includes 2020 free cash flow outlook, net of residual value guarantee (RVG) payments.
We seek Safe Harbor.
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