Runaway train

10 August 2020 By Christopher Thompson Follow @CGAThompson

The French train maker hinted it will reassess an $8.2 bln buyout of its Canadian rival’s unit following surprise losses. A 20% price cut would allow CEO Henri Poupart-Lafarge to make an economic return. EU consent for a deal and Bombardier’s high debts strengthen his hand.

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Alstom said on Aug. 10 that it would “take into account” Bombardier's weak results earlier this month as it continues with plans to buy the Canadian company's rail business.

The French train maker in July secured European Union antitrust approval to acquire the Bombardier rail business, in a deal with an enterprise value of around 7.45 billion euros, aimed at making Alstom the world's second-largest rail maker after China's CRRC.

Bombardier on Aug. 6 reported a quarterly loss of $319 million.

"Alstom remains convinced of the strong strategic rationale for the acquisition of Bombardier Transportation and is confident in its ability to restore in the medium term the profitability and commercial performance of the business," the company said.

"However, the quarterly announcement points to unexpected and negative developments regarding Bombardier Transportation, which is currently facing challenges, especially when compared to the information available prior to the Feb. 17, 2020 announcement regarding Alstom’s intended acquisition of Bombardier Transportation," it added.

Bombardier said: “We are complying with all of the conditions of the MOU between Alstom, Bombardier and Caisse de dépôt et placement du Québec, and will continue to work towards executing a definitive agreement in a timely manner. We will provide any updates as appropriate.”

Alstom shares were down 1.4% at 46.66 euros by 1500 GMT on Aug. 10. Bombardier’s B shares were down 1.2% at C$0.42.

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