This article was posted on 22.01.2020, and updated on 13.02.2020. 17.02.2020, and 18.02.2020 (new information added). Scroll down to see the update.
In a second press release from 17.02.2020, Alstom provides further details about its strategic decision to acquire Bombardier’s Transportation division, which it refers to as “a unique opportunity to accelerate Alstom’s strategic roadmap, Alstom in Motion”:
“I’m very proud to announce the acquisition of Bombardier Transportation, which is a unique opportunity to strengthen our global position on the booming mobility market. This acquisition will improve our global reach and our ability to respond to the ever-increasing need for sustainable mobility. Bombardier Transportation will bring to Alstom complementary geographical presence and industrial footprint in growing markets, as well as additional technological platforms. It will significantly increase our innovation capabilities to lead smart and green innovation. We will be thrilled to welcome all the talent and energy of Bombardier Transportation employees. We are deeply committed to step up the turnaround of Bombardier Transportation activities and deliver significant value to all stakeholders, particularly our customers. We will also further develop Bombardier Transportation’s historical presence in Québec, drawing on Québec’s well-established strengths in innovation and sustainable mobility. We are pleased to welcome CDPQ as a new long-term shareholder. CDPQ is fully supportive of the transaction and Alstom’s strategy.” – Henri Poupart-Lafarge, Chairman and CEO of Alstom
Alstom states it is committed to recovering Bombardier Transportation’s full operational and profitability potential with the objective of restoring project execution and margin towards the standard level. To do this, the new owner will focus on operation turnaround and backlog while incorporating Alstom’s best practices and technologies and financial discipline.
A Memorandum of Understanding
A Memorandum of Understanding (MOU) has been signed and approved by Alstom, Bombardier Inc., and Quebec Deposit and Investment Fund (CDPQ). It organizes the information and consultation process between Alstom and Bombardier and contains exclusive commitments by both parties. Here are some of the highlights:
- Post-transaction, Alstom will have a backlog of around EUR 75 billion and revenues around EUR 15.5 billion;
- Alstom will benefit from significant additional technologies and added R&D resources to consolidate its innovation leadership in sustainable mobility;
- Acquisition price from EUR 5.8 billion to EUR 6.2 billion – according to Alstom. Bombardier specifies an Enterprise Value of EUR 7.45 billion.
- After the transaction, Montréal will welcome the Headquarters of Alstom of the Americas, leading all Alstom operations and expansion in these geographies;
- In addition, drawing on Québec’s well-established strengths in innovation and sustainable mobility, Alstom will establish a center of excellence for design and engineering, as well as high-tech R&D activities, which will notably be focused on developing sustainable mobility solutions;
- CDPQ (currently holding 32.5% of Bombardier Transportation), will become the largest shareholder of Alstom with approximately 18% of capital. CDPQ will reinvest its proceeds for EUR 2.0 approx. billion and realize an additional investment of EUR 0.7 billion in Alstom.
- Bouygues will remain an important shareholder of Alstom with around 10% of the capital.
Benefits for Alstom
- Geographical presence expansion to broaden Alstom’s commercial reach in markets such as Germany, UK, North America, and notably China;
- Rolling stock additions to Alstom’s portfolio, notably with selective niches such as Monorail, People Mover;
- Access to the largest installed train fleet worldwide and a wide maintenance facilities network and strategic new geographies in signaling;
- Smart and green energy innovations for mobility portfolio innovation thanks to an increase of engineering and R&D resources.
- By 10.2020: An extraordinary general meeting (EGM) voting on the reserved capital increases and the rights issue
- H2 2020 – H1 2021: Subject to the EGM, rights issue will take place and the reserved capital increases will take place at closing.
- H1 2021: The transaction will also be subject to clearance from relevant regulatory authorities and anti-trust authorities. Closing is expected in the first half of 2021.
What comes next for Bombardier
At the same timeBombardier announced it has made the strategic decision to focus exclusively on business aviation:
“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,” – Alain Bellemare, President and Chief Executive Officer, Bombardier Inc.
About Bombardier Aviation
Headquartered in Montréal, Canada and with major operations in 16 countries around the world, Bombardier Aviation is a market-leading business, currently standing at more than 4800 business jet aircraft. It employs more than 18000 workers and its heritage dates back 30 years.
Bombardier expects that business jet deliveries will grow significantly, driven by the large cabin segment. This is explained by continued global economic growth, as well as 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, the Aviation business has a competitive product line-up in the industry. Its flagship aircraft, 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 aircrafts. The portfolio also includes the Challenger 350 and Challenger 650, as well as the new Learjet 75 Liberty. In 2020, Bombardier Aviation expects to deliver 160 or more aircraft.
It is now official. Today Alstom released the following public statement, confirming its interest in acquiring Bombardier’s Railway division:
Alstom confirms being in discussions with Bombardier regarding a possible acquisition of Bombardier Transportation by Alstom. Discussions are on-going. No final decision has been made. Alstom will inform the public of any material developments in this respect.
After the Siemens – Alstom merger failed to come into life, a new attempt is being made to create a stronger than ever European railway manufacturer. This time the French company is taking the initiative. As German business newspaper Handelsblatt reports: Alstom is set to acquire the entire Bombardier Transportation division. This is what we know so far.
Handelsblatt reports: Alstom buys Bombardier Transportation for EUR 7 billion. And while this information is still unconfirmed, the German newspaper expects that the deal will be made public
on 13.02.2020 – this did not occur. Stay tuned for further updates.
Our original article from 22.01.2020:
Hey, now we have all three possible combinations. Three main actors in the European railway industry keep on dancing around each other. Bloomberg reports that allegedly now, Bombardier and Alstom are exploring the option to merge their rail units. A short overview of the main events since 2017:
- Why? China’s CRRC is the biggest manufacturer of rolling stock in the world and is increasingly active on European railways market, the last market where CRRC has not yet a substantial market share
- Several years ago, Siemens and Bombardier were already talking about a possible alignment of their rail portfolios until Siemens decided to start negotiations with Alstom instead.
- In 2019 Siemens and Alstom made a concrete plan to form a ‘European champion,’ but the European Union decided to block the merger. There were concerns that the new company would become too dominant in several segments of the European market (signaling, for example). EU commissioner Violeta Bulc did not expect that CRRC would not become an imminent threat, at least not in the short term.
- Since then CRRC made several significant moves, it decided to buy Vossloh Locomotives in Kiel and landed contracts for the delivery of new locomotives (Rail Cargo Hungaria) and light rail.
- But, the Vossloh plan is not yet a done deal. There is strong political opposition in Germany – that has to approve the sale, and not yet has done so.
- Now we get the first indication that the third possible combination is being ‘explored’: Bombardier and Alstom
- When you read the Bloomberg article you see that the Chinese competition is not the only concern for Bombardier – The company is selling business units to get itself back in a more stable financial position