“Today, we are proud to announce that the government of
Québec will invest $1 billion in the C Series aircraft
program. This partnership comes at a pivotal time, with
the C Series on the verge of certification. The market
is there, our leadership is in place, we have the best
product and with the support of the government, we are
ready to make this aircraft a commercial success,” added
Mr. Bellemare.
Consistent with its strategy, Bombardier is pursuing the
placement of a minority stake in its Transportation
business segment. Bombardier Transportation is a global
market leader with a local production presence in over
20 countries, the broadest portfolio of products and
services and the largest engineering organization in the
industry. The excellent outlook for the rail
transportation sector has been acknowledged in
preliminary conversations with potential investors and
the Corporation expects to make an announcement soon.
Since launching the Bombardier transformation plan in
the second quarter of 2015, the Corporation has
completed a bottom-up assessment of the operational
changes needed to succeed. Through this process, the
transformation teams identified many key initiatives to
deliver important cash savings over the next five years.
These initiatives are either in the validation phase or
being executed by the business segment teams to generate
the forecasted savings. The focus is currently on
reducing inventory and product costs, which represent
important drivers of Bombardier’s competitiveness.
In
September 2015, airline industry veteran Nico Buchholz
was appointed as Senior Vice President and Chief
Procurement Officer, Bombardier Inc. Previously, Mr.
Buchholz spent 14 years at Lufthansa, where he was in
charge of the corporate fleet, including the procurement
of airframes and engines. In this new position, his main
role is to ensure that goods and services purchased by
Bombardier meet the highest standards in terms of
quality, on-time delivery and cost-efficiency.
Government of Québec's investment in the C Series
aircraft program - Bombardier has entered into a
memorandum of understanding which contemplates a $1.0
billion investment by the Ministère de l’Économie, de
l’Innovation et des Exportations du Québec (through
Investissement Québec) (the Government) for a 49.5%
equity stake in a newly-created limited partnership (the
Investment) to which would be transferred the assets,
liabilities and obligations of the C Series aircraft
program. This newly created limited partnership will be
owned 50.5% by Bombardier and, as a subsidiary of
Bombardier, will
carry on the operations related to the
Corporation’s C Series aircraft program. After the
Investment, the newly created limited partnership will
continue to be consolidated in Bombardier's financial
results.
The Investment has been approved by the Board of
Directors of Bombardier and the Cabinet of the
Government of Québec, and remains conditional upon the
completion of definitive agreements, the receipt of
consents from third parties, the completion of an
internal pre-closing reorganization, the receipt of
required regulatory approvals and other customary
conditions precedent. The proceeds of the Investment
will be used entirely for cash flow purposes of the C
Series program.
The Investment also includes the issuance to the
Government of warrants exercisable to acquire up to
200,000,000 Class B Shares (subordinate voting) in the
capital of Bombardier (Class B Shares) (representing
approximately 8.18% of the aggregate issued and
outstanding Class A Shares (multiple voting) in the
capital of Bombardier (Class A Shares) and Class B
Shares assuming the exercise of the warrants, and
approximately 8.90% of the aggregate issued and
outstanding Class A Shares and Class B Shares on a
non-diluted basis), at an exercise price per share equal
to the US$ equivalent of $2.21 Cdn on the date of
execution of definitive agreements, which represents a
premium to the 5-day VWAP of the Class B Shares on the
TSX as of
October 20, 2015.
The TSX has determined to accept notice of the private
placement of warrants and has conditionally approved the
listing of the Class B Shares issuable pursuant to the
terms of the warrants on the TSX. Listing will be
subject to Bombardier fulfilling all of the listing
requirements of the TSX. The warrants will have a
five-year term from the date of issue and will not be
listed on the TSX. The warrants (and any Class B Shares
issuable pursuant to the exercise of the warrants prior
to the expiration of the applicable hold period), will
be subject to a statutory four-month hold period. The
warrants will contain market standard adjustment
provisions, including in the event of corporate changes,
stock splits, non-cash dividends, distributions of
rights, options or warrants to all or substantially all
shareholders or consolidations.
Security holder approval is required under TSX rules due
to the fact that the warrants will be issued later than
45 days from the date upon which the exercise price was
established, as set out in Section 607(f)(i) of the TSX
Company Manual. Such approval has been obtained, as
agreed with the TSX, by way of written consent of
shareholders holding more than 50% of the voting rights
attached to all of Bombardier’s issued and outstanding
shares.
The Investment was negotiated between Bombardier and the
Government at arm’s length and will not materially
affect control of Bombardier.
The definitive agreements are expected to be entered
into on or before January 1, 2016, or such other date as
the Corporation and the Government shall agree, and
disbursement of the Investment and issuance of the
warrants will occur over two equal installments,
expected to take place on April 1, 2016 and June 30,
2016, respectively, subject to the conditions to
closing.
The Investment contemplates a continuity undertaking
providing that Bombardier shall maintain in the
Province of Québec, for a period of 20 years, the
newly-created limited partnership’s operational,
financial and strategic headquarters, manufacturing
and engineering activities, shared services,
policies, practices and investment plans for
research and development, in each case in respect of
the design, manufacture and marketing of CS100 and
CS300 aircraft and after-sales services for these
aircraft and that Bombardier will operate the
facilities located in Mirabel for these purposes.
The Government’s interest in the partnership will be
redeemable in certain circumstances.
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