Alstom Reaches Preliminary Deal to Buy Bombardier Train Unit -- Update
February 16 2020 - 12:59PM
Dow Jones News
By Jacquie McNish and Ben Dummett
French train giant Alstom SA has reached a preliminary deal to
acquire Bombardier Inc.'s train business for more that $7 billion,
according to people familiar with the matter.
If terms are completed, the deal could be announced as early as
Monday, according to these people.
Paris-based Alstom is expected to acquire the business from
Montreal-based Bombardier using mostly cash and some stock,
according to these people.
Quebec pension giant Caisse de dépôt et placement, which owns a
32.5% stake in Bombardier's train unit, has agreed to sell its
stake to Alstom and acquire a minority stake in the combined train
company, according to people familiar with the matter.
The planned deal is the latest effort by Alstom to join forces
with a rival to gain scale amid the prospect of increased
competition from China's state-owned CRRC, the world's largest rail
supplier.
In 2017, Alstom unsuccessfully tried to merge with the
train-making business of German industrial giant Siemens AG. But
the European Commission, the European Union's antitrust authority,
blocked that proposed tie-up in 2019, arguing that it would lead to
higher prices for signaling systems and the next generation of very
high-speed trains in the bloc.
The Alstom-Bombardier deal would also likely face intense
scrutiny from the EU among other antitrust regulators. Bombardier's
train business has a big presence in Europe with headquarters in
Germany. Siemens could have reason to oppose the deal following
Bombardier's opposition to the German company's previous deal with
Alstom.
The planned sale would more than halve Bombardier's current debt
of $9 billion and reduce the once-sprawling global transportation
manufacturer to a business jet manufacturer of such brands as the
Challenger, Learjet and Global aircraft.
Bombardier is dramatically shrinking its business after
production problems and order delays in its core train unit and
rising costs in some of its aviation units threatened its ability
to pay more than $1.5 billion debt coming due next year. In the
past year it has agreed to sell a variety of divisions including
its commercial airline, turboprop and aerostructure units.
Several weeks ago it initiated talks to sell its business jet
division to Textron Inc. because of concerns that negotiations to
sell the train division to Alstom were bogged down. The talks with
Textron are expected to be terminated once the agreement with
Alstom is completed, the people familiar with the matter said.
Write to Jacquie McNish at Jacquie.McNish@wsj.com and Ben
Dummett at ben.dummett@wsj.com
(END) Dow Jones Newswires
February 16, 2020 12:44 ET (17:44 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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