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Alstom and Bombardier sign agreement for sale with revised price

The purchase of Bombardier Transportation by Alstom has taken the next step forward, with a definitive Sale and Purchase Agreement signed by the two parties.

The sale involves a €300 million ($486m) write-down of the value of Bombardier Transportation from the figure quoted in the Memorandum of Understanding which announced the sale process.

When the MoU was announced in February, Bombardier Transportation was valued at between €5.8 and €6.2 billion ($9.4 to $10bn). The revised price values Bombardier’s transport business at €5.5 to €5.9bn ($8.9 to 9.5bn). Alstom expects the proceeds will likely amount to up to €5.3bn based on post-closing adjustment and obligations.

Henri Poupart-Lafarge chairman and CEO of Alstom said the sale would strengthen Alstom’s presence in the market.

“Bombardier Transportation will bring to Alstom complementary geographical presence to broaden Alstom’s commercial reach in key growing markets, strong product complementarities in rolling stock, strategic scale in services and signalling, industrial capacity in key countries, a leading portfolio offering and additional R&D capabilities to invest in green and smart innovation,” he said.

Éric Martel, president and CEO of Bombardier Inc said the sale would adjust the profile of the business.

Today’s announcement marks a significant milestone towards achieving our near-term priorities and repositioning Bombardier as a pure-play business jet company,” he said. “The proceeds from this transaction will allow us to begin reshaping our capital structure and start addressing our balance sheet through debt paydown, so that we can achieve the full potential of our incredibly talented employees and our industry leading business jet portfolio.”

According to a statement from Alstom, the company expects to find synergies of €400m ($648m) in four to five years after the sale.

The sale is expected to be closed in the first quarter of 2021 with the sale having cleared antitrust processes in the EU as well as Australia.

Alstom to acquire Bombardier Transportation

Confirming weeks of rumours, Alstom has announced that it has signed a Memorandum of Understanding with Bombardier Inc to acquire Bombardier’s transportation unit.

The MoU values Bombardier Transportation at between €5.8 and €6.2 billion ($9.4 to $10 billion).

Henri Puopart-Lafarge, chairman and CEO of Alstom announced the merger of the two rail manufacturing giants.

“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.”

Although headquartered in Canada, Bombardier’s transport operations are led from Berlin, Germany. The deal, if approved, could create a European rail champion, a goal which Alstom previously pursued in discussions with Siemens, with whom Bombardier also pursued merger talks.

Puopart-Lafarge acknowledged that the two companies share similar operating areas.

“Bombardier Transportation will bring to Alstom complementary geographical presence and industrial footprint in growing markets, as well as additional technological platforms,” he said.

Bombardier representatives also welcomed the deal’s announcement.

“With a shared commitment to the next generation of green and digital rail solutions, a combined company would benefit from economies of scale resulting into improved investment and innovation capabilities, and a streamlined investment pipeline,” said Eric Prud’Homme, head of external communications at Bombardier Transportation.

In Australia, Alstom and Bombardier both have significant manufacturing operations. Bombardier manufactures diesel multiple units and light rail vehicles in Dandenong, Victoria while Alstom has a manufacturing base in Ballarat where it produces the X’Trapolis trains for the Melbourne network. Additionally, Alstom has been confirmed as the manufacturer of new rollingstock for Perth’s Metronet project, and will construct a local manufacturing facility in Western Australia.

Previous merger discussions between Siemens and Alstom drew the attention of the Australian Competition and Consumer Commission, which noted that a merger would raise competition concerns, however in the field of signalling. Ultimately, the European Commission blocked the proposed deal.

In the MoU announcement, Poupart-Lafarge said that all existing employees of Bombardier Transportation would continue to work for Alstom once the deal is completed.

“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,” he said.

Alstom expects that, subject to approvals from regulatory and anti-trust authorities, the deal will be closed in the first half of 2021.

Unconfirmed reports of Bombardier and Alstom in merger talks

Neither Bombardier nor Alstom have confirmed reports published by Bloomberg, that the two rail companies are discussing a potential merger.

An unnamed source told Bloomberg that the French rollingstock manufacturer and Canadian train maker have been in talks over the past few months.

A spokesperson for Bombardier told Rail Express said the company does not comment on market gossip.

A spokesperson for Alstom also noted that the company does not comment on market speculation.

The reports published in Bloomberg had an immediate impact on the share prices of both companies, with Alstom shares rising by 2 per cent in Paris, and Bombardier shares ending 5.7 per cent higher in Toronto.

In Australia, both companies have a major presence, with Alstom recently announced as the manufacturer of the rollingstock for Perth’s Metronet project. With a 50 per cent local content requirement, the company has committed to building the trains at a manufacturing facility in Bellevue. Alstom’s light rail vehicles are running on the recently opened Sydney light rail line.

Bombardier’s Australian presence is spread across all states except Tasmania, and the company has manufacturing facilities in Victoria and WA.

Bombardier, which also manufactures aircraft, had previously been in talks with German rail manufacturer Siemens about merging, however the Munich-based rail manufacturer then swapped to negotiate with Alstom. The EU subsequently blocked this merger based on antitrust laws.

On Monday, January 20, Bombardier announced that it would provide maintenance for 656 high-speed train cars in China, on top of a joint-venture contract to build 160 new high-speed cars in China.