BUSINESS
02/17/2020 10:33 EST | Updated 02/18/2020 10:28 EST

Bombardier In Talks To Shed Rail Division After Exiting Civilian Aircraft

Everything about us must go!

MONTREAL ― Bombardier Inc. says it is in talks over a potential deal to sell its rail business to French train giant Alstom SA.

The deal would mark a major shift in Bombardier’s turnaround plan as the plane-and-train maker would cast off its problem-plagued largest division and commit itself solely to business jets, in part to help pay down more than US$9 billion in debt.

The would-be acquisition also signals an effort by Alstom to scale up amid rising competition from China’s state-owned CRRC, the world’s largest train maker.

Bombardier and Alstom say discussions are ongoing and no final decision has been made.

Montreal-based Bombardier has sold several divisions since CEO Alain Bellemare took the helm in 2015, including its turboprop and aerostructure segments as well as its commercial airline unit, once touted as the company’s crown jewel.

The company announced last week it had sold its remaining stake in the A220 jetliner program, which represented its last commercial aviation venture.

Any deal with Alstom is expected to come under intense scrutiny from antitrust regulators in the European Union. Last year, EU authorities blocked a proposed merger between Alstom and the train division of German industrial conglomerate Siemens AG, arguing the proposed tie-up would result in higher price tags on signalling systems and bullet trains.

The reported deal with Alstom would come after Bombardier, which is carrying long-term debt of US$9.3 billion, announced last month it was studying its options to accelerate its deleveraging, or reducing debt by selling assets.

Bombardier reported a loss of US$1.61 billion for 2019.

Selling off assets

The sale of its train division would add to the list of assets the company has sold in the last five years, which includes Q400 turboprop planes, the CRJ regional jet program and the former C Series aircraft.

The sale would mean the Quebec company, which was founded in Valcourt, Que., in 1942 as a snowmobile manufacturer, will focus its business on high-margin private jets.

According to the Wall Street Journal, the Paris-based train maker is expected to use mostly cash and some stock to complete the transaction.

Quebec’s pension fund manager, the Caisse de depot et placement du Quebec, has reportedly agreed to sell its 32.5 per cent stake to Alstom in return for a minority stake in the combined company, according to the sources quoted in the article.

On Sunday, a spokesman for Caisse refused to confirm the information.

Bombardier Transportation is based in Berlin and employs some 1,000 workers at factories in Quebec’s Bas-St-Laurent region and in St-Bruno-de-Montarville, on Montreal’s South Shore.

― This story combines Canadian Press wire reports published on Feb. 16 and Feb. 17, 2020.