EMAIL DETAILS

Copying Hunter, Devon et al. Clock is ticking and the competition is
pouring in. We need to amass our resources and starting engage with
Bombardier.


Xin


发件人: 王昕 [mailto:xin.wang@bhrpe.com]
发送时间: Friday, April 24, 2015 12:44 PM
收件人: 'James Bulger'
抄送: 'Michael Leonard'
主题: 转发: Bombardier


Jimmy C further to our discussions re. Bombardier, see latest update below.


Xin


Bombardier (TSE:BBD.B) has begun discussions with prospective bidders for
Bombardier Transportation (BT), including Hitachi (TYO:6501) and a merged
China CNR (HKG:6199, SHA:601299) and CSR (HKG:1766, SHA:601766), according
to a source familiar with the situation.

Alstom (EPA:ALO) is seen as another possible buyer, but any deal with the
company, which will soon be partly owned by the French government, is
expected to be significantly more difficult to execute than a deal with the
other parties, the source said.

Bombardier began considering options for BT late last year and has had
exploratory talks with various parties over the past couple of months, the
source explained. Further meetings are scheduled over the next couple of
weeks, though a formal process has yet to get underway, the source added.

A spokesperson for the Montreal-based company said that “[BT] is not for
sale” and pointed to comments made in its year-end earnings announcement
that it plans to “explore other initiatives such as certain business
activities’ potential participation in industry consolidation.”

Chinese state-owned CNR and CSR, which will be renamed CRRC when they merge
in the coming months, declined to comment. Hitachi and Alstom also declined
to comment.

Earlier this month, Bloomberg reported that Bombardier had mandated UBS and
Citigroup to advise on a possible sale or initial public offering of the
unit later this year.

The sale talks are proceeding concurrently with work on a possible IPO, for
which preparations are already underway, the source said.

In the event of a sale, a deal with Hitachi has the potential to close
quicker than one with CRRC, since the latter would need to secure approvals
from Chinese regulators in an oftentimes lengthy process, the source noted.

While discussions remain fluid, a possible sale would entail Bombardier
divesting up to 60% of BT for close to USD 5.5bn, which represents around
11x TTM EBITDA of USD 602m, the source said. Bombardier has offered to
transfer to the parent any debt at the BT-level, which was described as
minimal, the source added.

A put option for the remaining 40% could be on the table, the source said,
though Bombardier has indicated in discussions that it is inclined to remain
a long-term shareholder of BT.

One sector banker said a BT valuation in the 10x to 12x range would appear
to be on the high side and that based on recent deals in the space, a
multiple of 7x to 8x would be more reasonable.

Both Hitachi and CNR/CSR are currently completing deals of their own, but
this is not considered as an obstacle to a possible deal over BT, according
to the source.

Hitachi is working to close its acquisition of Finmeccanica’s (BIT:FNC)
stake in Ansaldo STS and AnsaldoBreda for a total of about EUR 2bn. The
deal, which was announced in February, is scheduled to close later this
year.

CNR and CSR, China’s top two train manufacturers, announced in December
they would merge in a USD 26bn deal to create CRRC. The deal is still
awaiting regulatory approvals and is expected to close in July.

Alstom is also in the process of seeking regulatory approvals for the sale
of its power equipment business to General Electric (NYSE:GE).

Although a deal with a state-owned Chinese company like CRRC could raise
some sovereignty issues in Canada, a second sector banker pointed out such
concerns could probably be abated given that Bombardier has had a
substantial amount of experience working with the Chinese in various joint
ventures.

On the other hand, any deal to potentially sell BT to Alstom or other rivals
in Europe could result in significant overlap given a substantial portion of
BT's operations are based on the continent, the same banker said. Synergies
could potentially be derived by cutting jobs and closing plants, which would
not be something that would be politically tenable, he noted.

At home, BT employs fewer staff in Quebec than Bombardier’s aerospace
division, so the government could probably digest a scenario in which it is
sold to a foreign buyer, according to the first banker. “The rail division
is less important to the Quebec economy than the transportation division,”
he said.

by Takashi Toyokawa in New York and Zena Olijnyk in Toronto

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