French rail manufacturer Alstom announced Monday, February 17, that it has signed a memorandum of understanding with Bombardier and the Caisse de depot et placement du Quebec (CDPQ) to buy 100% of Bombardier Transport, the rail sector of the Canadian conglomerate, for a price included between 5.8 and 6.2 billion euros. The group thus increased should have a combined turnover of more than 15 billion euros, with an order book of more than 75 billion. It will thus be better able to cope with the Chinese behemoth CRRC, whose turnover reached the equivalent of 28 billion euros in 2018.
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The CDPQ, which currently owns 32.5% of Bombardier Transportation, is expected to become the largest shareholder of Alstom at the end of the operation with around 18% of the capital, the French group said in a press release. The Caisse must indeed reinvest in Alstom all of the net proceeds from the sale of its stake in Bombardier Transportation and invest an additional 700 million euros in the group. Bouygues, currently the largest shareholder in the French rail group with 15% of the capital, will keep about 10%, according to the press release from Alstom.
The transaction must still be approved
“This acquisition will strengthen our international presence and our ability to meet the ever-increasing demand for sustainable mobility solutions. Bombardier Transportation will provide Alstom with geographic and industrial complementarity in growing markets, as well as additional technological platforms”, a commented the CEO of Alstom Henri Poupart-Lafarge, cited in the press release. “We are convinced that the sale of our rail transport activities to Alstom is the right thing to do for all stakeholders,” said Bombardier boss Alain Bellemare in a separate press release.
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The Canadian group, in financial difficulty, wants to allocate the proceeds of the sale to reduce its debt, which amounted at the end of 2019 to $ 9.3 billion, he added. The transaction, partly paid in cash and partly in shares newly issued by Alstom, still needs to be approved by the competition authorities, an important element after the European Commission rejected, in February 2019, the takeover of 'Alstom by German Siemens. “The completion of the transaction is expected in the first half of 2021,” said Alstom.