RAILWAY INDUSTRY Alstom completes the acquisition of Bombardier Transportation
Alstom announced the completion of the acquisition of Bombardier Transportation. By integrating Bombardier Transportation, Alstom will strengthen its position in the growing sustainable mobility market by reaching a critical size in all geographies and integrating further solutions and assets for its customers worldwide.
A group serving a growing market
The rail market is supported by fundamental growth drivers, such as accelerated urbanization, public investment strategies, and the worldwide push for green and digital transformation of transport systems. Despite the pandemic, recent stimulus announcements clearly confirm the development of sustainable mobility and more specifically of rail as a long-term priority. The rail manufacturing market is expected to grow at a 2.3 % CAGR by 2025.
The Group will have an commercial reach in all geographies thanks to the complementarities of the two companies. While the Alstom Group already had a well-established customer base in France, Italy, Spain, India, South East Asia, Northern Africa and Brazil, Bombardier Transportation will bring strong customer proximity in strategic markets such as the United-Kingdom, Germany, the Nordics, China, and North America. The Group will have now in particular very strong capabilities in Europe and North America, which represent approximately 75 % of the OEM accessible market.
The headquarters of Alstom of the Americas will be based in Montréal, Québec – leading all operations in the region – as well as establishing a centre of excellence for design and engineering that will build on Québec’s strengths in innovation and sustainable mobility. Alstom will be even closer to its clients and able to leverage its knowledge of mobility worldwide to offer mobility solutions.
A global and balanced footprint to serve clients worldwide
The Group will have access to further strategic industrial capacities with competitive industrial footprint across both mature markets, such as Western Europe, North America, Australia, and growing markets, including Eastern Europe, Mexico and India. Bombardier Transportation brings hubs of expertise for locomotives and bogies in Germany, monorail and people movers in Canada, suburban and regional trains in France and the United-Kingdom, traction in Sweden, along with engineering centres in best cost countries in Thailand. It brings also seven well-established joint-ventures in China. With those immediate strategic additions to Alstom’s already diversified footprint, the enlarged Group has access to deeper industrial expertise and is closer to its customers.
R&D capabilities to fuel green and smart innovation
Alstom is already a pioneer in mobility with innovations such as the recent hydrogen train, autonomous train operation, energy efficient rolling stock and infrastructure. Bringing together c.17,500 engineering and R&D talents from both groups, consolidating a rich legacy of 10,000 patents and incorporating significant additional technologies from Bombardier Transportation, for example in predictive maintenance, signalling and digital operations, the Group will be able to develop solutions at a faster pace and on a larger scale to make mobility of tomorrow a reality. Alstom is accelerating towards its ambition: be the global innovative player for a sustainable and smart mobility.
Confirmed long-term value creation for all stakeholders
The employees of Bombardier Transportation join the Alstom Group as from January 29, 2021. These new talents will enrich Alstom’s operational profile at all levels and build, with Alstom’s employees, one agile, inclusive and responsible Alstom team.
With rail being the lowest CO2 emissive motorized mode of transportation, the Group is more than ever focused on its ambition to decarbonize mobility. Alstom reaffirms its commitments to create a positive impact in the communities it operates, to provide employees with the best working environment and experience, and to be at the highest standards in terms of responsible business practices.
Alstom confirms its objective to generate EUR400 million cost synergies on annual run rate basis by the fourth to fifth year and to restore Bombardier Transportation’s margin to a standard level in the medium term. The transaction is expected to be double digit EPS accretive from year 2 post closing.and to preserve Alstom’s strong credit profile with a Baa2 rating.
Shareholding and governance: a new main shareholder with a long-term investment approach
CDPQ (Caisse de dépôt et placement du Québec) today becomes Alstom’s main shareholder with 17.5 % of Alstom’s share capital. CDPQ is committed to a long-term shareholder approach with a strong track record of investing in infrastructure and transport assets. Bouygues now holds approximately 6 % of Alstom’s share capital. In accordance with the resolutions approved by the Alstom’s Shareholders’ Meeting held on October 29, 2020, Ms Kim Thomassin, representing CDPQ, and Mr Serge Godin joined today Alstom’s Board of Directors. Mr Benoit Raillard has been appointed by Alstom’s Board of Directors as observer (censeur) upon CDPQ’s proposal.
Price and financing
The reference price was established at EUR5.5 billion, at the bottom of the range of EUR5.5 billion to EUR5.9 billion communicated on September 16th, 2020. The proceeds for the acquisition were established at EUR4.4 billion, which include the impact of the minimum cash adjustment mechanism based on a negative net cash position of Bombardier Transportation as of December 31, 2020 and other further contractual adjustments for an amount of EUR1.1 billion.
The acquisition was financed through the rights issue of around EUR2 billion completed on December 7, 2020, and part of the senior bond issuance of EUR750 million completed on January 11, 2021, and by the reserved capital increases to the benefit of affiliates of CDPQ and Bombardier Inc., in total amounts, respectively, of EUR2.6 billion and EUR500 million completed today as part of the closing of the transaction.