On January 29, 2021 Alstom announced the completion of the acquisition of Bombardier Transportation, one of the two core business of Bombardier Inc. “Today is a unique moment for Alstom and the mobility sector worldwide, with the creation of a new global leader centered on smart and sustainable mobility. More than ever, the world has to engage in a deep environmental and social transition to be able to address the great challenges of urbanization, equal opportunity to economic development and climate change. Transportation, essential to the working and social life but with great environmental impact is at the heart of this transition. Our responsibility, together with the 75,000 people of Alstom today, is to transform our unique set of assets created by this transaction into the enabler of this necessary transformation. Our responsibility is to bring the innovation required for such extreme challenges and that all communities throughout the world, as they are traveling to meet loved ones or to work, can have access to the same quality of service and efficiency, while caring for our planet.” said Henri Poupart-Lafarge, Chairman and CEO of Alstom.
Who are the legal advisors involved in this transaction?
Jeanne Theuret: Bombardier has retained Citigroup Global Markets Inc. and UBS Investment Bank as financial advisors and Norton Rose Fulbright as lead legal counsel, with Jones Day as advisor on competition law matters outside of Canada. HSBC acted as financial advisor and McCarthy Tétrault LLP and Freshfields Bruckhaus Deringer LLP acted as legal counsel to CDPQ in this transaction. Rothschild & Co and Société Générale are financial advisors to Alstom. Cleary Gottlieb Steen & Hamilton LLP is acting as legal counsel to Alstom, with Davies Ward Philips & Vineberg LLP advising on Canadian law matters.
What is the history of this transaction? In your opinion, why did Alstom choose Cleary Gottlieb?
Pierre-Yves Chabert: The need for consolidation in this sector has existed for a long time, and market participants talk to each other regularly. Since it became independent as a transportation actor, Cleary Gottlieb has been supporting Alstom in its strategic thinking and in its major projects, including the attempted merger with Siemens. The acquisition of Bombardier Transportation was a complex transaction that requires specialized expertise in corporate and public M&A law in an international context, areas in which Cleary Gottlieb is a leader in Paris. This transaction also includes a sensitive competition law component, as demonstrated by the Siemens transaction. Our firm is well equipped, both in Paris and in Brussels, to assist Alstom in structuring and implementing such a transaction.
What are the main steps in this acquisition?
Jeanne Theuret: The transaction was launched at the end of 2019. The documentation is structured in a fairly standard way: a Memorandum of Understanding was signed on February 17, 2020, enabling the launch of the process of information and consultation of the employee representative bodies of both entities. The share purchase agreement relating to 100% of the shares of Bombardier Transportation has been signed on September 16, 2021 and closing of the acquisition occurred on January 29, 2021. An Extraordinary General Shareholders’ Meeting relating to the reserved capital increases and the capital increase with preferential subscription rights was held on October 29, 2020 and approved all the resolutions related to the transaction.
What is the structure of the transaction?
Pierre-Yves Chabert: The transaction consists of the acquisition, by Alstom Holding (a subsidiary of Alstom SA which holds all the group’s holdings), of 100% of the shares of Bombardier Transportation held by Bombardier Inc. and CDPQ. This cash acquisition, for an announced amount of between €5.5 billion and €5.9 billion (following the renegotiation of the terms of the agreement in September 2020), depending on Bombardier’s accounts and adjustment mechanisms at the date of completion of the transaction, was financed by Alstom SA through a capital and debt raising. The acquisition was financed through the rights issue of around €2 billion completed on December 7, 2020, and part of the senior bond issuance of €750 million completed on January 11, 2021, and by the reserved capital increases to the benefit of affiliates of CDPQ and Bombardier Inc., in total amounts, respectively, of €2.6 billion and €500 million completed as of completion as part of the closing of the transaction.
How is the CDPQ investment a positive development for Alstom?
Pierre-Yves Chabert: This is a good thing in several respects. First, it means that one of the sellers is participating in the transaction by remaining a major shareholder in the purchasing entity. This proves its attachment to the asset and its desire to continue to support it. When the main seller reinvests, it is always very reassuring for the buyer. It means that it believes in the asset it is selling and the one it is buying into. This is a very positive element for the transaction. Secondly, this investment demonstrates the attractiveness of Alstom’s business model because not only CDPQ reinvested its share of the proceeds, but it also invested an additional $700 million in new money, thus increasing the total amount of its investment in Alstom. This is an additional act of confidence on the part of CDPQ regarding the future of the combined entity. Finally, it gives Alstom a new reference shareholder, which stabilizes the shareholder base for the future. Finally, it should be noted that CDPQ is an institutional investor of excellent quality, which is also important in strengthening the attractiveness of Alstom’s stock.
How is this operation transformative?
Pierre-Yves Chabert: Today, the world leader in this sector is the Chinese group CRRC, which is three times the size of Alstom stand alone. For Alstom, this acquisition is key to accelerate its strategic plan and create a European player in the Mobility sector, capable of competing on a global level. Strategically, it is essential for Alstom to grow in order to have a more solid production and research and development capacity, enabling it to face the current global competition.
Are other consolidation transactions in this sector expected in the near future?
Pierre-Yves Chabert: This is a sector that is consolidating. The main players are all looking to make acquisitions in order to gain critical mass in the face of foreign giants. Alstom is getting a head start, which is good for France and Europe.