Caisse investing $1.5B U.S. in Bombardier for stake in rail business

Caisse de dépôt et placement du Québec is acquiring a 30-per-cent stake in Bombardier Inc.’s (BBDb.TO) rail business for US$1.5-billion in a move aimed at bolstering the manufacturer’s financial stability.

The transaction, which suggests Bombardier has scrapped plans to list Bombardier Transportation, values the unit at $5 billion.

BT Holdco will own all…

Bombardier had been examining several options for its rail division, including an initial public offering and an auction process for the private placement of a minority stake, the company said Thursday.

He declined to say how much Bombardier was asking for.

Quebec Economy Minister Jacques Daoust said at the time he expected Ottawa to also help finance Bombardier, which is considered one of the most important companies in the province.

The new holding company will be governed independently by a new board to be composed of seven members, three of which will be named by the Caisse.

If either CDPQ or Bombardier seeks to sell its stake in BT Holdco, it will first offer it to the other party.

The pension fund manager’s investment also includes provisions that would see its stake be reduced if Bombardier Transportation outperforms its business plan and vice versa.

If the unit under performs, Caisse’s interest will rise by 2.5 percent annually, up to a maximum of 42.5 percent over a five-year period. In the event it falls below that level, a Special Initiatives Committee would be appointed to develop a plan to restore it.