Canada’s Bombardier Inc. confirmed on Monday that it will be selling out its rail unit to France’s Alstom SA as it prepared to focus more on the aviation business. The deal will carry an enterprise value of USD 8.2 billion, with equity and debt included in it. For Alstom SA, the deal gives them the platform to build on for challenging Chinese rivals China Railway Rolling Stock Corporation (CRRC). Bombardier will receive the payment mostly in cash along with a major portion of new Alstom shares. The deal is expected to be closed out by the end of 2021.
The deal involves Caisse de dépôt et placement du Québec, the Canadian pension fund manager, which will become the biggest shareholder in Alstom after the deal is completed. Caisse de dépôt et placement du Québec is a 30 percent shareholder in Bombardier’s rail unit. After cutting down Caisse’s proceeds, Bombardier will be left with net proceeds of around USD 4.2 billion to USD 4.5 billion. Bombardier Inc. and Alstom SA have both been troubled by increasing debt in recent times and the deal is expected to help both the companies on that front. For Alstom SA, the acquisition will help itself progress on its plans of building a more competitive European train manufacturing company for the Chinese giants CRRC.
After the deal was announced by both the companies, the shares for both Bombardier Inc. and Alstom SA fell on Tuesday. Bombardier’s shares were down 7.88 percent to read C$1.52 per share while Alstom’s shares fell 3.2 percent to reach 48.70 euros per share. Analysts have expressed concern that the deal will have to undergo a long antitrust hearing over competitive grounds. The acquisition will make Alstom the second largest train manufacturer in the world.
