Canadian company Bombardier Inc’s train business will be purchased by the French transport infrastructure company Alstom SA and the tow companies have reached a preliminary deal to that effect. The deal will be worth more than $7 billion on an enterprise value basis.
This was first reported on Bloomberg on January 21 and later by the in the Wall Street Journal on Sunday and the news was partially was later confirmed by Alstom.
While not confirming whether a deal had been reached between the companies, Alstom confirmed on Monday that the two companies were in negotiations over a possible deal.
“Alstom confirms being in discussions with Bombardier regarding a possible acquisition of Bombardier Transportation by Alstom. Discussions are ongoing. No final decision has been made,” Alstom said in a statement.
However there were reports that suggested that the two companies were almost in completion of the talks and the signing of a preliminary deal for the acquisition of Bombardier’s train business.
Alstom was prevented by European regulators to merge with Germany’s Siemens last year, and analysts said that this new deal will give the European company enough firepower to effectively rival Chinese rail giant CRRC Corp Ltd.
Last week, Bombardier also announced its decision to sell off its stake in the A220 passenger jet program to Airbus and the Quebec government. The company has been facing troubles in containing increased rail costs due to a few problematic contracts in a backlog that has now worth a total of almost $36 billion.
A 32.5 per cent stake in Bombardier’s train unit is currently held by Quebec pension giant Caisse de dépôt et placement which has now agreed to sell off its stake to Alstom while taking up a minority stake in the new combined train business, said reports.
Late last month, Bombardier issued a warning of disappointing fourth-quarter sales which surprised the market.
Reports also suggested that cash and some stock component would mainly be used by Alstom to complete the deal.
Analysts also noted that Alstom will also be able to avoid paying a material premium due to Bombardier Transportation’s cash needs and recent project delays if the deal is indeed finally completed, said reports.
(Adapted from Livemint.com & Reuters.com)