Story ID: 168
Bizav To Become Sole Focus of Bombardier
By: Kerry Lynch
Caption: Bombardier's proposed sale of its Transportation unit to Alstom will significantly reduce its debt and leave the sole focus on its Business Aircraft unit.
Word Count: 538
Bombardier quieted talks of a potential sale of its Business Aviation unit and took steps to dramatically reduce its debt burden with the February 17 announcement of the proposed sale of its Bombardier Transportation unit to Alstrom. In announcing the memorandum of understanding to sell its train business to the French rail magnate, Bombardier said it has made a “strategic decision” to focus on business aviation and accelerate its deleveraging efforts through the sale of Transportation in a deal valued at $8.2 billion.

Alain Bellemare, president and CEO of Bombardier Inc., called the proposed sale of Transportation a “transformational deal” that would conclude its turnaround efforts.

“Today marks an exciting new chapter for Bombardier,” Bellemare said. “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.”

The Transportation piece marks one of the final businesses that Bombardier had left to sell, outside of its Business Aviation business; the Canadian company had struck a number of deals to shave off its other businesses over the past year as it looked to stockpile cash in the face of looming debt payments. Last week Bombardier revealed plans to sell its share of the A220 airliner program to Airbus for nearly $600 million, and late last year it reached agreements to sell its training business to CAE for $645 million and its Q400 program to Viking Air for $300 million. These sales followed announcements earlier last year to sell its aerostructures business in Belfast and CRJ program.

More recently, though, rumors had circulated that Bombardier was in talks about the potential sale of its Business Aircraft unit to Textron, something neither company publicly confirmed.

When asked yesterday if Bombardier would still consider an offer for that business, Bellemare responded no and said, “We’ve completed the turnaround…We really like our business aviation business.”

Anticipated to close in the first half of 2021, the sale of Transportation must still receive final shareholder blessing and regulatory approvals. Key to the proposal is that it will generate much-needed cash. The agreement is estimated to generate net proceeds of between $4.2 billion to $4.5 billion, including $550 million in Alstrom shares.

Ultimately, the cumulative sales will leave Bombardier with between $6.5 billion and $7 billion cash on the hand, which Bellemare said would put the long-debt-burdened company “on a brand-new footing to address its $9.3 billion of debt.” The end result, Bombardier said, would be a targeted $2.5 billion in pro forma net debt. Meanwhile, the sale would represent a 12-times adjusted EBIT multiple based on a three-year average from 2016-2018.

What’s left would be a business aircraft manufacturer that employs 18,000, currently has a $14.4 billion backlog and an installed base of business jets of 4,800 aircraft. Bombardier, which anticipates delivering at least 160 aircraft in 2020—including a ramp-up of its flagship Global 7500—expressed optimism that business jet deliveries are expected to grow significantly, driven by the large-cabin segment.
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