Alstom purchases Bombardier’s rail unit at $6.7 billion buyout deal; shares plunged

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Alstom purchases Bombardier’s rail unit at $6.7 billion buyout deal; shares plunged

Late on Monday, the 17th of February 2020, the Saint-Ouen-based French multinational railway transport provider, Alstom SA had finally sealed an €6.2 billion ($6.7 billion) acquisition deal for the Canadian industrial conglomerate Bombardier’s railway unit, nonetheless, the deal would be subjected to the verdicts of competition regulators and could result in a raft of job slashes.

More importantly, Alstom’s $6.7 billion cash and shares takeover deal for Bombardier’s railway unit which was announced late on Monday (February 17th), would create the world’s second-largest train manufacturer behind China’s state-backed CRRC Corp and mark up the latest in a string of events where a western railway operator had been trying to build scalability and to reduce operational costs amid a highly competitive railway transport industry.

Nonetheless, following the announcement of the deal, shares’ prices of both Alstom and Bombardier fell sharply, since the Canadian conglomerate engaged primarily in train and business jet manufacturing had to sell-off one of its high-profit margin businesses aimed at lightening some of its debt stockpiles, while Alstom’s stakeholders were fretted of uncertainties ahead due to a time-consuming anti-trust process.

Besides, the Montreal-based Canadian multinational manufacturer of railway units and business jets shrugged off nearly a tenth of its market cap on Tuesday’s (February 18th) market closure and wrapped up the day 10.08 per cent lower to $1.12 per share, while over the European front, Alstom shares’ prices ended the day down by 0.38 per cent to $5.26 per share after falling as much as 2.17 per cent in early morning trading.

Nonetheless, if the takeover deal is approved, it would lower Bombardier’s debt-piles to $2.5 billion by mid-2021.