Officially Announced Wednesday Morning
Bombardier Inc. just
announced that it has reached an agreement in principle for the
sale of its recreational products business for an aggregate
purchase price of $1.225 billion (Canadian). This agreement was
entered into by a corporation formed by Bain Capital, members of
the Bombardier family, and the Caisse de depot et placement du
Quebec.
The Board received favorable fairness opinions from its own
financial advisor, UBS, and from Morgan Stanley, financial advisor
to the independent committee. Directors of Bombardier who are
members of the Bombardier family abstained from participating in
Board meetings in which the transaction was considered and did not
vote on the transaction.
ANN was in on the conference call,
...as Bombardier Inc.
President and Chief Executive Officer Mr. Paul M. Tellier spoke in
both French and English, as he announced the finalization of the
deal to sell Bombardier Recreational Products.
"This sale of Bombardier Recreational Products
represents the conclusion of the last of the major elements of the
financial restructuring of Bombardier that we announced April 1st,"
he said. That allowed a new round of financing, of which he was
quite proud: "We issued $1.2 billion," in debt, he reminded us,
"that was oversubscribed." Bombardier also sold the business
aircraft division, an airport, and other major assets.
"This will improve ...our cash situation, and this will improve
out debt-to-equity ratio. This is a major point -- and I repeat, a
major point -- of our restructuring," he said.
Ongoing business is good, considering...
"Overall, we are pleased
with our second-quarter results. The trend lines are in the right
direction; but of course there is still a lot of hard work to do...
Revenues are stable, in spite of a continuing challenging economic
environment." He expanded on that: "The backlog has gone up, from
$44 to $48 billion dollars (Canadian)." 66 commercial aircraft,
opposed to 53 last year -- the best ever."
He added that, "Earnings before taxes for the first half of the
year were 4.5%, comparable to last year." Things don't look bad for
the future, either: "As far as I know," he said, "we are the only
manufacturer in the business that has not reduced our forecasts for
this year."
The crux of the matter, he said was that Bombardier was,
"Delivering on what we said we would do, winding down businesses we
are exiting; assets under management 'way down from $11.1 last year
to $6.8 billion (Canadian) this year. It's very simple," he
continued, "we will do what we say we will do. The hard work -- to
improve profitability -- is well on the way."
Regarding a question about Bombardier's oversubscription, Mr.
Tellier replied, "To have too much cash is a very good problem to
have. I do not think that we have too much cash."
A bigger 'liner?
Tellier said that, for the forseeable future at least, "We have
no plans for a 100-seat or more aircraft. We are pleased with our
fine line of aircraft, as it is." Part of that is due to how hard
it is for airlines and other customers to get credit. Financing
opportunities (companies that finance airliners) have gone "...from
50 or so, to a handful." Bombardier is getting some financing from
the Canadian government, but Tellier emphasized that, "This is
market-rate financing; it is not any kind of subsidy."
Future of Recreational Products
"We did not sell the
Recreational Products Division because we did not have confidence.
It was to increase cash flow, increase equity. We have great
confidence in its future."
Tellier was high on Rec Products' lines: personal watercraft
("in which we hold a market leadership position"), Evinrude, OMC...
but he said not a word about Rotax, or the new V-6 aircraft engine.
Why sell Recreational Products, as opposed to some other
division? It had to do with Bombardier's vision of its core
businesses, Mr. Tellier explained. "There was very little
'carving-out' required... therefore it was relatively easy to sell
this [unit]... as opposed to [selling] something else."
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