La Caisse de dépôt et placement du Québec (CDPQ) has agreed a CAD$1.5 billion (US$1.21 billion) convertible share investment in Bombardier Transportation's newly-created holding company, Bombardier Transportation UK Ltd (BT Holdco).
Under the terms of the agreement, CDPQ will acquire shares of BT Holdco convertible into a 30% common equity stake of BT Holdco, subject to annual adjustments related to performance. The transaction will be executed through a private placement and values Bombardier Transportation at CAD$5 billion. The investment has been approved by the Boards of Directors of Bombardier and CDPQ.
BT Holdco will own all of the assets of Bombardier's current Transportation business segment, with its operational headquarters remaining in Germany. It will be governed independently by a new Board to be composed of seven members, three of which will be named by CDPQ. Alain Bellemare will chair the Board. Dr. Lutz Bertling, President, Bombardier Transportation, will continue in his current role.
The funds to be received by BT Holdco from the transaction will be distributed to Bombardier, which intends to use the proceeds for general corporate purposes.
Alain Bellemare, President and Chief Executive Officer of Bombardier, stated:
"This investment by CDPQ, which has a long history as one of our major investors, is a testimonial to the growth potential of the rail industry and to Bombardier's leadership in seizing the opportunities this market offers on a global scale. Bombardierand CDPQ have one common objective: leveraging Bombardier Transportation's innovative portfolio of products and services, engineering talent and worldwide presence to drive margin expansion," he added.
Michael Sabia, President and Chief Executive Officer of CDPQ, commented:
"Bombardier Transportation is a global leader in the rail industry, with a robust backlog, predictable revenues, and meaningful potential for growth. The strong performance incentives that are at the heart of this transaction and management's plan to improve execution have a single focus: creating more value at Bombardier Transportation. The hybrid investment instrument designed for this transaction allows our depositors to benefit from the improving performance of Bombardier Transportation with its equity-like features, while protecting their capital through its bond-like characteristics. This investment is structured with the goal of delivering double-digit returns."