Breaking News
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Alstom to buy Bombardier rail unit for up to $6.7 billion

Stock MarketsFeb 17, 2020 04:53PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. FILE PHOTO: The Bombardier FV-Dosto double-deck train "Ville de Geneve" of Swiss railway operator SBB is seen at the central station in Zurich

By Gwénaëlle Barzic and Allison Lampert

PARIS/MONTREAL (Reuters) - France's Alstom (PA:ALSO) SA has agreed to buy the rail division of Canada's Bombardier Inc for up to 6.2 billion euros ($6.7 billion) to create the world's No. 2 train manufacturer and better take on Chinese leader CRRC Corp.

The cash and shares deal, announced on Monday, is the latest attempt by Western rail firms to try to build scale.

Alstom, the maker of TGV bullet trains that speed between French cities such as Paris and Nice, was blocked last year from merging with Germany's Siemens AG (DE:SIEGn) by European regulators, who argued the deal could penalize consumers.

The agreement between Alstom and Bombardier would unite companies with an estimated $17 billion in combined revenue.

The French firm said the two were complementary geographically, adding Bombardier's European footprint was stronger in northern countries and the Canadian firm would add expertise in monorail trains as well as rail services.

"We don't see it as a huge issue," Alstom Chief Executive Henri Poupart-Lafarge said of regulatory hurdles on a conference call. "If there are some issues, they will be much easier to solve than the one we had with Siemens."

A combination with Bombardier would give Alstom a share of between 40% and 60% of the European regional train market, according to estimates cited by union sources in France, well above Siemens at 10% to 20%.

But some analysts have said there could be less opposition to a deal this time as Alstom and Bombardier have a lower combined European market share in high-speed rail and signaling.

The companies have informally briefed EU antitrust regulators on the deal, according to sources familiar with the matter.

The French government, which had criticized the EU's veto on the Siemens merger, welcomed the transaction.

"This deal will allow Alstom to prepare for the future, against the backdrop of increasingly intense international competition," Finance Minister Bruno Le Maire said, adding he was due to discuss it with the EU's antitrust boss, Margrethe Vestager, on Tuesday.

Bombardier and Alstom said they expected the deal to close in the first half of 2021. Their agreement includes a 75 million-euro break fee.


Train makers are eyeing consolidation to reduce costs and improve thin rolling stock margins, and Alstom said it also wanted to make the most of a boom in rail travel as consumers switch from planes for environmental reasons.

The merged group would be able to reach annual cost savings of 400 million euros from the fourth year, the company added.

Under the deal, one of the Bombardier rail division's shareholders, Canadian pension fund Caisse de depot et placement du Quebec, would become the lead investor in Alstom with an 18% stake.

French telecoms-to-construction conglomerate Bouygues (PA:BOUY) would retain around 10% of Alstom, which said it would finance the transaction by raising equity and with debt. The final price will be between 5.8 billion and 6.2 billion euros, it said.

The deal gives Bombardier's rail unit an enterprise value - equity plus debt - of $8.2 billion, which would allow the Canadian firm to pay down some of its $9.3 billion in debt.

After closing, Montreal-based Bombardier would emerge as the only large pure business jet maker, with a focus on expanding aftermarket sales and margin expansion.

Aerospace analysts cautioned that the loss of rail's stable contracts would create greater risk for Bombardier in the event of a market downturn.

General Dynamics Corp (NYSE:GD), parent company of Bombardier's U.S. rival Gulfstream, generates revenue from military sales in addition to business jets, as does France's Dassault Aviation.

Bombardier has shed businesses after facing a cash crunch in 2015 while bringing a new plane to market. The Alstom deal comes days after it sold its stake in the A220 passenger jet program to Airbus.

It has also been struggling to contain higher rail costs generated by problematic contracts in its nearly $36 billion order backlog, which Alstom said it would look to fix.

"Clearly I would have preferred for things to have turned out differently for Bombardier," Quebec's premier, François Legault, said, adding Caisse's presence in Alstom's capital was a comfort for Canadian interests.

Bombardier Transportation is headquartered in Berlin and has plants worldwide including at Derby in central England, Mannheim in Germany and Crespin in northern France.

Alstom's Poupart-Lafarge said the acquisition would not affect jobs.


A previous flirtation between Siemens and Bombardier to combine some train businesses fell apart in 2017.

A source close to Siemens said there was no sign the firm was planning any type of counterbid, given EU regulators' tough stance on its previous attempts.

Germany's IG Metall union called on the German government to look at the matter and raised concerns about an Alstom-Bombardier deal, saying it "would not accept any consolidation at the expense of Germany" should EU regulators allow this combination. State-owned Deutsche Bahn is a big customer of both firms.

Alstom to buy Bombardier rail unit for up to $6.7 billion

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email