Bombardier To Receive US$4.2 to $4.5 billion From Alstom For Its Transportation Shares
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February 17, 2020 - by Bombardier Inc.
- 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.
Investor Webcast Information
Bombardier will host a conference call for investors and financial analysts on Monday, February 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 www.ir.bombardier.com.
Stakeholders wishing to listen to the presentation and question and answer period by telephone may dial one of the following conference call numbers:
+1 514 394 9320 or
+1 866 240 8954 (toll-free in North America)
+800 6578 9868 (overseas calls)
+1 514 394 9316 or
+1 888 791 1368 (toll-free in North America)
+800 6578 9868 (overseas calls)
A recording of the call will be available on Bombardier's website shortly after the end of the webcast.
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. Our products and services provide world-class transportation experiences that set new standards in passenger comfort, energy efficiency, reliability and safety.
Headquartered in Montréal, Canada, Bombardier has production and engineering sites in over 25 countries across the segments of Aviation and Transportation. Bombardier shares are traded on the Toronto Stock Exchange (BBD). In the fiscal year ended December 31, 2019, Bombardier posted revenues of $15.8 billion. News and information are available at bombardier.com or follow us on Twitter @Bombardier.
Bombardier Inc. uses its website as a channel of distribution for material company information. Financial and other material information regarding Bombardier Inc. is routinely posted on its website and accessible at bombardier.com . Investors are hereby notified information about regular dividends declared and paid by Bombardier is only made available through its website, unless otherwise required by applicable securities laws.
Bombardier, Challenger, Challenger 350, Challenger 650, Global, Global 5500, Global 6500, Global 7500, Learjet 75 Liberty are trademarks of Bombardier Inc. and its subsidiaries.
(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.
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