W E DN E S DAY , J AN U ARY 29, 2020 | T HE GLOB E AND MAIL G R EPORT ON BUSINESS | B3

Are planes or trains the better bet for Bombardier to sell?

Company is already in company through a dual-share
structure and has strong ties to
talks with rival Alstom, the aviation business. Mr. Belle-
but decision of what mare’s roots are also in aerospace,
to cut is not so simple including a stint running teams
that built fighter jets engines. The
CEO and chairman could decide to
ANDREW WILLIS sell the transport business, which
has lower profit margins and slow-
er projected sales growth than the
ANALySIS aviation unit.
Analysts see three leading con-

D
oes Bombardier Inc. chief
executive officer Alain Bel-
lemare prefer trains or
planes?
The former engineer and boss
of the Montreal-based aerospace
and transport company revealed
earlier this month that he is “ac-
tively pursuing options to streng-
then Bombardier’s balance sheet
and enhance shareholder value.”
Bankers expect that, with US$9-
billion of debt to pay down, Mr.
Bellemare will in the next six
months sell either the division
that makes corporate jets under
the Learjet, Challenger and Global
brands, or the unit that makes
trains and subway cars.
Here’s the catch: Analysts agree
that while the transport division
would be easier to flog – Bombar-
dier is already reported to be nego-
tiating a deal with rival train-mak-
er Alstom SA – selling the aviation
business would be the better long-
term decision, as it would allow
Mr. Bellemare to exit a cyclical in-
dustry that may be near its peak.
“Investors have long-standing
concerns about business jet over-
supply and the need for big invest-
ment in new platforms,” J.P. Mor-
gan Securities LLC analyst Seth
Seifman said in a report. He said
the sector will consolidate around
its largest players, and is one of
several analysts highlighting Tex-
tron Inc. as the logical buyer of
Bombardier’s aviation division.
Rhode Island-based Textron al-
ready makes Beechcraft, Cessna
and Hawker aircraft, and acquir-
ing the Bombardier unit would
make it the market leader. Brazil’s
Embraer SA and private equity
funds would also take a look.
If the only factor in Mr. Belle-
mare’s decision was paying down
The interior of a GO Train is seen at a Bombardier plant in Thunder Bay last November. Bombardier’s transport
group would sell for around US$5-billion to US$6-billion, one analyst says. DAVID JACKSON/THE GLOBE AND MAIL
TRAINS OR PLANES? debt, this would be a simple
Bombardier is considering a sale of its aviation or transportation choice: Bombardier’s CEO would
divisions. Here’s what theY are estimated to be worth and some likely cut ties with business jets.
potential buYers The division could fetch between
US$8.5-billion and US$10.5-bil-
BOMBARDIER TRANSPORT lion, according to a report pub-
lished on Tuesday by analyst Ko-
Products: Trains, subwaY cars, switching equipment nark Gupta at Scotia Capital Inc.,
more than enough money to fix
Forecast 2020 sales: US$8.7-billion the balance sheet.
In contrast, Mr. Gupta predict-
Potential Value: ed the transport group would sell
US$5 to US$6-billion
for something in the US$5-billion
to US$6-billion neighbourhood.
Potential buYers: Alstom, Siemens, Hitachi, private equitY
Bombardier would need to hand
over an estimated US$2.4-billion
BOMBARDIER AVIATION of that to the Caisse de dépôt et
placement du Québec, which
Brands: Learjet, Challenger, Global holds a minority stake in the unit.
But nothing is ever simple at
Forecast 2020 sales: US$8.2-billion Bombardier. National Bank Fi-
nancial analyst Cameron Doerk-
Potential Value: US$8.5 to US$10.5-billion sen noted that selling the aviation
division to a foreign company
Potential buYers: Textron, Airbus, Boeing, Gulfstream, could translate into job cuts in
Embraer, Dassault, private equitY Quebec, which would stir up a po-
litical hornet’s nest. In addition,
SOURCE: BOMBARDIER, BANK OF NOVA SCOTIA, Mr. Bellemare must win support
ROYAL BANK OF CANADA; JP MORGAN for any restructuring from Bom-
bardier chairman Pierre Beau-
doin, whose family controls the
tenders for Bombardier’s train-
making business: France’s Al-
stom, industry leader Siemens AG
of Germany and Japan’s Hitachi
Ltd. The challenge is getting any
potential deal with Alstom or Sie-
mens approved by European
competition watchdogs, who
scuppered a proposed union of
the French and German compa-
nies last February. “There are
more potential strategic buyers
for Bombardier Transport,” Na-
tional Bank’s Mr. Doerksen said in
a report, but he qualified that by
adding that any transaction “will
face a lengthy regulatory review.”
Bombardier is telling investors
Mr. Bellemare enjoys the luxury
of time to strengthen the balance
sheet, as it has plenty of capital.
The company ended last year
with US$2.6-billion of cash, and
will receive another US$1.1-billion
later this year when it closes the
sale of two aerospace businesses.
But the clock is ticking. Bom-
bardier must raise significant
sums to pay down debt, and con-
tinue to fund its share of costs for
the C Series passenger jet, a
US$350-million-plus obligation
negotiated when the unit was sold
to Airbus in 2017. RBC Dominion
Securities Inc. analyst Walter
Spracklin recently reduced his 12-
month target price on Bombar-
dier stock to $2 from $3 to reflect
“the ever-mounting liquidity cri-
sis, with many investors we talked
to doubtful as to whether there is
a solution.” Bombardier will an-
nounce financial results in mid-
February, and Mr. Bellmare faces
growing pressure to choose by
then between planes and trains.
BOMBARDIER (BBD.B)
CLOSE: $1.30, UP 10¢

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IF YOU OWN SECURITIES OF ANY OF THE FOLLOWING ISSUERS, YOU ARE INVITED TO EXCHANGE THOSE SECURITIES FOR UNITS
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American Electric Power Co Inc AEP Keyera Corp KEY
Atco Ltd/Canada ACO/X Kinder Morgan Inc/DE KMI
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Alphabet Inc GOOGL Keysight Technologies Inc KEYS
Amazon.com Inc AMZN Microsoft Corp MSFT
American Tower Corp AMT Motorola Solutions Inc MSI
Apple Inc AAPL Netflix Inc NFLX
AT&T Inc T QTS Realty Trust Inc QTS
BCE Inc BCE Quebecor Inc QBR/B
CenturyLink Inc CTL Rogers Communications Inc RCI/B
Cisco Systems Inc CSCO SBA Communications Corp SBAC
CoreSite Realty Corp COR Shaw Communications Inc SJR/B
Crown Castle International Corp CCI Shopify Inc SHOP
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OTHER ISSUERS
Bank of Montreal BMO Manulife Financial Corp MFC
Canadian Pacific Railway Ltd CP National Bank of Canada NA
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A preliminary prospectus containing important information relating to these securities has been filed with securities commissions or similar authorities in each of the provinces of Canada. The preliminary
prospectus is still subject to completion or amendment. Copies of the preliminary prospectus may be obtained from any of the syndicate of agents using the contact information for such agent. There will not
be any sale or any acceptance of an offer to buy the securities until a receipt for the final prospectus has been issued.