Bombardier Exploring Business Unit Sales To Raise Cash to Fund CSeries Jet

Oct 1 2015 | 6:54pm ET

Bombardier is considering selling a stake in any of its multiple business units in order to finance the completion of its CSeries jet, a decision that may lead to private equity involvement in the Montreal-based conglomerate. 

The company had previously suggested it would be willing to sell a stake in its rail unit. Now, it has hired investment bankers to explore other options and is reportedly willing to consider a wide range of alternatives, including full or partial sales of business lines, bringing in private equity investors, or forming joint ventures. 

Bombardier hopes to close on a financing arrangement, potentially with the Canadian government, before its third-quarter earnings report on Oct. 29, according to a Reuters article, and the company’s board is expected to meet within the next week.

Bombardier is not without cash – in February, it raised more than $860 million through an equity offering and more than $2.2 billion in debt – but reportedly also wants to add heft to its balance sheet in order to shore up its lagging stock price. Bombardier’s stock is down more than 60% so far this year, due in part to the decline in energy and commodities that has largely torpedoed the Canadian stock market.

The company has been marketing its rail unit, which makes rail cars, transportation systems and related equipment, for much of 2015. In May, it revealed plans to file an IPO for a minority stake in the unit during the fourth quarter, and rejected a proposal by Chinese transportation firm Beijing Infrastructure that valued the segment at as much as $8 billion. As of September, plans for the IPO were still on track, according to Bloomberg.

Getting deals together for individual segments may be complicated, however. Insitutional investors may stumble on the control of Bombardier’s founding Beaudoin family, while the provincial government in Quebec has said it would come to Bombardier’s aid if needed without giving any details on what form such assistance might take. Bombardier sold its FlexJet fractional business jet ownership program to a consortium headed by specialist private equity firm Directional Aviation Capital in September 2013.

Bombardier is one of the world’s leading manufacturers of trains and aircraft. The company’s CSeries narrow-body commercial jet has been beset with cost overruns and is years behind its original schedule. While it is one of the most hotly awaited new airframes in the industry, Bombardier needs an estimated $2.5-$3 billion to complete certification of the plane and market it effectively, according to aerospace industry research firm Teal Group.

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