Bombardier Inc. is discharging its stake in the French train manufacturer Alstom SA as the aircraft manufacturer definitively closes the books over 50 years in the rail sector.
Bombardier intends to sell around 11.5 million Alstom shares as part of an accelerated offer to investors, the Montreal-based company said in a statement on Tuesday. It secured the 3.1% stake, worth around $ 630 million at current market prices, in January, when it sold its rail business to Alstom.
Shares were blocked until this month. Bombardier could use the proceeds to repay its debt.
Bart Demosky, chief financial officer of Bombardier, told investors in March that the company had “targeted use” of the funds. He explained that Alstom shares are trading in euros while the company also has a € 400 million bond due this month.
For Bombardier, the sale of its rail operations to Alstom and the final cessation of its investment mark the end of a 50-year push in rail that began in 1970 with the acquisition of Austrian tram manufacturer Lohnerwerke. The company is now betting its future on business jets, betting that there are enough billionaires and executives willing to travel privately to spark new jet orders and keep its maintenance and service centers busy.
However, Alstom will always have a large Canadian institution among its investor base. The giant of pension funds, the Caisse de depot et placement du Québec, has become Alstom’s main shareholder thanks to the sale transaction of Bombardier with a 17.5% stake. Alstom plans to partner with the Caisse on future calls for tenders, said the CEO of Alstom.
Bombardier revealed on Monday that an unidentified bondholder of 2034 notes is challenging the legality of the train unit’s divestiture, claiming that and other asset sales violated terms of its contract with investors . In an attempt to resolve the issue, Bombardier is taking a broader approach with holders of eight separate senior debenture tranches to seek consent to clarify language indicating that asset sales are permitted.
Alstom shares are listed on the regulated market of Euronext in Paris.
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