- 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 Caisses participation in Bombardier Transportation (BT), la Caisse to become largest shareholder of Alstom
- Following adjustments for liabilities, net of BT cash, and la Caisses 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) 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 Caisses 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 Alstoms 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 worlds 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 worlds 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 Aviations 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 Bombardiers 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 Bombardiers 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.
(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.
This press release includes forward-looking statements, which may involve, but are not limited to: statements with respect to our objectives, anticipations and outlook or guidance in respect of various financial and global metrics and sources of contribution thereto, targets, goals, priorities, market and strategies, financial position, market position, capabilities, competitive strengths, credit ratings, beliefs, prospects, plans, expectations, anticipations, estimates and intentions; general economic and business outlook, prospects and trends of an industry; expected growth in demand for products and services; growth strategy, including in the business aircraft aftermarket business; product development, including projected design, characteristics, capacity or performance; expected or scheduled entry-into-service of products and services, orders, deliveries, testing, lead times, certifications and project execution in general; competitive position; expectations regarding progress and completion of challenging Transportation projects and the release of working capital therefrom within the anticipated timeframe; expectations regarding revenue and backlog mix; the expected impact of the legislative and regulatory environment and legal proceedings on our business and operations; strength of capital profile and balance sheet, creditworthiness, available liquidities and capital resources, expected financial requirements and ongoing review of strategic and financial alternatives; the introduction of productivity enhancements, operational efficiencies and restructuring initiatives and anticipated costs, intended benefits and timing thereof; the expected objectives and financial targets underlying our transformation plan and the timing and progress in execution thereof, including the anticipated business transition to growth cycle and cash generation; expectations and objectives regarding debt repayments and refinancing of bank facilities and maturities; and intentions and objectives for our programs, assets and operations. As it relates to the transaction discussed herein, this press release also contains forward-looking statements with respect to: the expected terms, conditions, and timing for completion thereof; the anticipated proceeds and use thereof and/or consideration therefor, as well as the anticipated benefits of such transaction and their expected impact on our outlook, guidance and targets, operations, infrastructure, opportunities, financial condition and cash on hand, business plan and overall strategy (including our expectation of a deleveraged profile and reshaped capital structure and the removal of CDPQs preferred equity in Transportation); and the fact that closing of this transaction will be conditioned on certain events occurring, including without limitation the receipt of necessary regulatory approvals, the execution of definitive documentation, receipt of Alstom shareholder approval in respect of the required capital increase and completion of relevant works council consultations.
Forward-looking statements can generally be identified by the use of forward-looking terminology such as may, will, shall, can, expect, estimate, intend, anticipate, plan, foresee, believe, continue, maintain or align, the negative of these terms, variations of them or similar terminology. Forward-looking statements are presented for the purpose of assisting investors and others in understanding certain key elements of our current objectives, strategic priorities, expectations, outlook and plans, and in obtaining a better understanding of our business and anticipated operating environment. Readers are cautioned that such information may not be appropriate for other purposes.
By their nature, forward-looking statements require management to make assumptions and are subject to important known and unknown risks and uncertainties, which may cause our actual results in future periods to differ materially from forecast results set forth in forward-looking statements. While management considers these assumptions to be reasonable and appropriate based on information currently available, there is risk that they may not be accurate. The assumptions underlying the forward-looking statements made in this press release in relation to the transaction discussed herein include the following material assumptions: the satisfaction of all closing conditions (including without limitation receipt of regulatory approvals on acceptable terms within commonly experienced time frames, the execution of definitive documentation, receipt of Alstom shareholder approval in respect of the required capital increase and successful completion of relevant works council consultations) and successful completion of such transaction within the anticipated timeframe, the realization of the intended benefits therefrom (including receipt of expected proceeds and intended use thereof) within the anticipated timeframe; the ability of the Company to retain key management and employees during the pendency and following completion of the transaction; the ability of the Company to satisfy its liabilities and meet its financial covenants and debt service obligations during the pendency and following completion of the transaction; the ability of the Company to access the capital markets as needed during the pendency and following completion of the transaction; and fulfillment by the other parties of their respective obligations, commitments and undertakings pursuant to transaction documentation and agreements in principle. In addition, the assumptions underlying the forward-looking statements made in this press release in relation to the Companys pro forma cash on hand and stronger balance sheet include the satisfaction of all closing conditions (including without limitation receipt of regulatory approvals on acceptable terms within commonly experienced time frames) and successful completion of the sale of our operations in Belfast and Morocco and the sale of the CRJ aircraft program within the anticipated timeframe and receipt of expected proceeds and intended use thereof. For additional information, including with respect to the other assumptions underlying the forward-looking statements made in this press release, refer to the Strategic Priorities and Guidance and forward-looking statements sections in the applicable reportable segment in the MD&A of the Companys financial report for the fiscal year ended December 31, 2019.
Certain factors that could cause actual results to differ materially from those anticipated in the forward-looking statements include, but are not limited to, risks associated with general economic conditions, risks associated with our business environment (such as risks associated with Brexit, the financial condition of the airline industry, business aircraft customers, and the rail industry; trade policy; increased competition; political instability and force majeure events or global climate change), operational risks (such as risks related to developing new products and services; development of new business and awarding of new contracts; book-to-bill ratio and order backlog; the certification and homologation of products and services; fixed-price and fixed-term commitments and production and project execution, including challenges associated with challenging Transportation projects and the risk that actions and initiatives undertaken by Transportation to move forward and complete such projects may not be successful, and the intended outcome and release of working capital therefrom not being realized, within the timeframe anticipated or at all; pressures on cash flows and capital expenditures based on project-cycle fluctuations and seasonality; risks associated with our ability to successfully implement and execute our strategy, transformation plan, productivity enhancements, operational efficiencies and restructuring initiatives; doing business with partners; inadequacy of cash planning and management and project funding; product performance warranty and casualty claim losses; regulatory and legal proceedings; environmental, health and safety risks; dependence on certain customers, contracts and suppliers; supply chain risks; human resources; reliance on information systems; reliance on and protection of intellectual property rights; reputation risks; risk management; tax matters; and adequacy of insurance coverage), financing risks (such as risks related to liquidity and access to capital markets; retirement benefit plan risk; exposure to credit risk; substantial existing debt and interest payment requirements; certain restrictive debt covenants and minimum cash levels; financing support provided for the benefit of certain customers; and reliance on government support), market risks (such as risks related to foreign currency fluctuations; changing interest rates; decreases in residual values; increases in commodity prices; and inflation rate fluctuations). For more details, see the Risks and uncertainties section in Other in the MD&A of the Companys financial report for the fiscal year ended December 31, 2019. With respect to the transaction discussed herein specifically, certain factors that could cause actual results to differ materially from those anticipated in the forward-looking statements include, but are not limited to: the failure to receive or delay in receiving regulatory approvals on acceptable terms or at all, the failure to receive or delay in receiving Alstom shareholder approval in respect of the required capital increase and to complete relevant works council consultations, or otherwise satisfy the conditions to the completion of this transaction or delay in completing, and uncertainty regarding the length of time required to complete, such transaction, and all or part of the intended benefits therefrom not being realized and all or part of the anticipated proceeds therefrom not being available to the Company within the anticipated timeframe, or at all; and alternate sources of funding that would be used to replace the anticipated proceeds from such transaction may not be available when needed, or on desirable terms; the failure to enter into definitive documentation for the transaction or the occurrence of an event which would allow the other parties to terminate their respective obligations, commitments and undertakings pursuant to transaction documentation and agreements in principle; changes in the terms of the transaction; the failure by the other parties to fulfill their respective obligations, commitments and undertakings pursuant to transaction documentation and agreements in principle; the Company being unable to satisfy its liabilities and meet its financial covenants and debt service obligations during the pendency and following completion of the transaction; the failure to retain the Companys key management, personnel and clients during the pendency and following completion of the transaction and risks associated with the loss and ongoing replacement of key management and personnel; and the impact of the announcement of the transaction on the Companys relationships with third parties, including potentially resulting in the loss of clients, employees, suppliers, business partners or other benefits and goodwill of the business. There is a risk that a party may terminate its respective obligations under the agreements in principle and Memorandum of Understanding prior to or after definitive binding agreements being entered into, including due to circumstances surrounding the relevant Works Council consultations. There is no certainty, nor can the Company provide any assurance, that the conditions to closing of the proposed transaction will be satisfied or, if satisfied, when they will be satisfied. If the proposed transaction is not completed for any reason, there is a risk that the announcement of such transaction and the dedication of substantial resources of the Company to the completion thereof could have a negative impact on the Companys operating results and business generally, and could have a material adverse effect on the current and future operations, financial condition and prospects of the Company, including the loss of investor confidence in connection with the Companys ability to execute its strategic plan. In addition, failure to complete the proposed transaction for any reason could materially negatively impact the market price of the Companys securities. If the proposed transaction is not completed for any reason, there can be no assurance that management will be successful in its efforts to identify and implement other strategic alternatives that would be in the best interests of the Company and its stakeholders within the context of existing market, regulatory and competitive conditions in the industries in which the Company operates, on favourable terms and timing or at all, and, if implemented, that such actions would have the planned results. We also have incurred significant transaction and related costs in connection with the proposed transaction, and additional significant or unanticipated costs may be incurred. With respect to the forward-looking statements made in this press release in relation to the Companys pro forma cash on hand and stronger balance sheet, additional factors that could cause actual results to differ materially from those anticipated in the forward-looking statements include, but are not limited to: the failure to receive or delay in receiving regulatory approvals on acceptable terms or at all, or otherwise satisfy the conditions to the completion of the sale of our operations in Belfast and Morocco and the sale of the CRJ aircraft program or delay in completing, and uncertainty regarding the length of time required to complete, such transactions, and all or part of the anticipated proceeds therefrom not being available to the Company within the anticipated timeframe, or at all; and alternate sources of funding that would be used to replace the anticipated proceeds from such transactions may not be available when needed, or on desirable terms. For more details, see the Risks and uncertainties section in Other in the MD&A of the Companys financial report for the fiscal year ended December 31, 2019.
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