Bombardier exits commercial aviation with $550-million sale of regional jets to Mitsubishi
News of the deal sent Bombardier shares up as much as 5 per cent
Bombardier Inc said on Tuesday it will sell its money-losing regional jet business to Japan’s Mitsubishi Heavy Industries Ltd (MHI) for US$550 million in cash, in a deal marking the Canadian plane and train maker’s exit from commercial aviation.
Montreal-based Bombardier had combined its aviation units to focus more on profitable business jets and passenger rail cars, after facing a cash-crunch in 2015 while bringing its flagship commercial jet to market.
News of the deal sent Bombardier shares up as much as 5 per cent in morning trade.
As part of the deal, which is expected to close in the first half of next year, the Japanese firm will also take over a US$200 million debt.
“We see the transaction as positive as it generates a return better than we had anticipated and ends the company’s exposure in a program which we believe was a drag on earnings,” AltaCorp analyst Chris Murray said in a note.
“In addition to Bombardier focusing on its core business jet and rolling stock/transportation businesses, the potential leverage reduction associated with this spinoff could be greater than we had anticipated,” Citi analyst Stephen Trent wrote in a note.
Bombardier will continue to assemble its regional jet planes (CRJ), but will stop making the aircraft in the second half of 2020, after it finishes delivering its remaining orders [empasis added].
CRJ’s profitable aftermarket sales, engineering expertise and heavy maintenance centres in the United States, would be useful for Mitsubishi, which is trying to develop and certify its delayed regional jet program, the MRJ.
“It’s an important step for us as a whole,” said Dan Lochmann, a spokesman for MHI.
About 1,600 people work on the CRJ program, including production employees as well as employees who provide aftermarket services. About 40 per cent of employees are in Canada.
Mitsubishi is “committed” to Bombardier’s workforce such as engineers and customer support workers, Lochmann said by phone from Japan. He could not comment on CRJ production workers [emphasis added].
Lochmann could not say whether Mitsubishi would set up a facility at Mirabel for the engineering staff.
The deal would be a boost for Japan’s civil aviation ambitions, even as Canada exits the market for commercial jetliners with less than 100 seats.
Bombardier and Mitsubishi had previously said they were holding talks over the regional jet program, confirming a report in industry news site The Air Current.
Mitsubishi is trying to develop its long-delayed MRJ regional jet program, which has been rebranded as “SpaceJet.”
The Japanese firm is trying to certify the plane, which has been delayed by several years with its first customer, ANA Holdings Inc, now expecting delivery in 2020 rather than in 2013 as originally planned.
Bombardier’s production of regional jets is expected to stop in the second half of 2020, following the delivery of the current backlog of aircraft.
Shares of Bombardier have risen 7.9 per cent this year compared with a 15.4 per cent increase in the main Toronto Stock Exchange index.
https://business.financialpost.com/transportation/airlines/bombardier-to-sell-regional-jet-program-to-mitsubishi-for-550-million-in-cash
