Alstom looks set to acquire Bombardier Transportation

Alstom is seeking to acquire Bombardier Transportation for a combination of cash and shares.

In an announcement on 17 February 2020, French transport manufacturer Alstom announced that it had signed a Memorandum of Understanding with Bombardier Inc. and its shareholder Caisse de dépôt et placement du Québec (CDPQ) with the view of acquiring Bombardier Transportation.

The price quoted in the announcement for the acquisition of 100 per cent of Bombardier Transportation’s shares was between €5.8 and €6.2 billion, to be paid by a mixture of cash and new Alstom shares. CDPQ will reinvest around €2 billion and further invest €0.7 billion in Alstom, which Alstom claimed would confirm CDPQ’s strong belief in the strategic rationale and value-creation potential of the combination.

For its part, CDPQ stated that, with this transaction, it would become the largest shareholder of the new Alstom, with a stake of around 18 per cent in the company, depending on financing and closing conditions. As such, CDPQ would appoint two representatives to sit on the company’s Board of Directors as well as a Board observer.

Bouygues is set to remain an important shareholder of Alstom, with around 10 per cent of capital. It is fully supportive of the transaction and undertook to vote in favour of the transaction-related resolutions at the Emergency General Meeting.

Henri Poupart-Lafarge, Alstom.

Henri Poupart-Lafarge, chairman and CEO of Alstom, spoke as though the takeover was already a done deal. “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,” he said.

“This acquisition will improve our global reach and our ability to respond to the ever-increasing need for sustainable mobility. Bombardier Transportation will bring to Alstom complementary geographical presence and industrial footprint in growing markets, as well as additional technological platforms. It will significantly increase our innovation capabilities to lead smart and green innovation.

“We will be thrilled to welcome all the talent and energy of Bombardier Transportation employees.”

However, an agreement to combine Alstom with Siemens Mobility in 2018 was later stymied by the European Commission due to competition concerns and the possibility that the merger would have resulted “in higher prices for the signalling systems that keep passengers safe and for the next generations of very high speed trains”. The new deal will have to go before those same competition policy commissioners, although, as it is a takeover by Alstom rather than a merger, the situation is slightly different.

Alstom’s ambition to combine with one of the other major players in the market seems to be an indication that it is looking over its shoulder at competition from China’s CRRC and feels it needs to grow to compete. Bombardier is strong in markets where Alstom is not – China and Mexico for example. It also brings new technologies, such as the monorail that is in use in São Paolo and has been chosen for Egypt. Interestingly, Bombardier has also received an order for a Chinese monorail system in Wuhu City, which it will supply through its joint venture with CRRC!

The combined Alstom/Bombardier operation will have an orderbook of some €75 billion, which will give it a strong global position. Whether this takeover will happen is now down to the market competition authorities.

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