Bombardier Sold to Alstom
On 17 February Monday, the world's third largest aircraft manufacturer - Bombardier was sold to French company Alstom. Bombardier was formed in 1989 and incorporated in Canada, with an average annual revenue estimated at USD11 billion for past 3 years.
On Monday at above date, Bombardier has agreed to sell its rail division to France’s Alstom for an enterprise value of USD8.2 billion. The spokesman of the company says the aircraft manufacturer can focus at higher concentration in expanding the aviation business and pay down its corporate debt.
The sale transaction includes equity plus debt. After the deal, most of the payment portion will be settled by newly issued Alstom shares. Both companies, buyer and seller, have confirmed in separate statements.
According to the spokesman of Bombardier, the selling company will be receiving net proceeds somewhat between USD4.2 - USD4.5 billion upon the sale, while the balance will be paid off Canadian pension fund manager Caisse de dépôt et placement du Québec, who owns 30 percent stakes in the Bombardier rail unit.
After the transaction is over, Caisse will become the biggest shareholder in Alstom following the deal, which is expected to close in the first half of 2021. In this case, Canadian fund will be entering the French market in due time and consolidate the future years of allied relationship between the two countries on many tax-related issues.
Pertaining to this transaction, we conclude that Bombardier is making the right move. On one hand, the rail unit is not making an organic growth and enlarging in debt for the owner. On another hand, the forecast and gradual development of coronavirus might stretch over another 6 - 9 months that could hamper multiple industries. When Asia economic spearheaded by China is going to be shaved in 2020, the overall Asia-AM mutual economy is not going to look good with the rapid fall in tourism.
In coming months and beyond June, we expect to see more economic meltdown and debt-laden matters among large MNC if the coronavirus is not contained. Of course, we hope to see a positive turnout and hope the repetition of SARS fiasco in 2003 can be staved off this time!
~ DAR Wong is a veteran in global financial markets and regulated professional in Singapore. The opinions are solely at his own. He can be reached at firstname.lastname@example.org
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