Exclusive: Canada's Bombardier looks to raise cash from rail business - sources

Fri Apr 10, 2015 6:25pm EDT
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By Freya Berry, Pamela Barbaglia and Sophie Sassard

LONDON (Reuters) - Bombardier Inc is exploring a possible sale of all or part of its railway business, which bankers value at up to $5 billion, among options to pay for huge cost overruns in its aircraft business, sources familiar with the matter said.

The Canadian company is working with banks on strategic options for its transportation arm, including a possible initial public offering either in Germany, where the business is based, or in Britain, three sources said on Friday. They declined to be identified since the matter is private.

A merger with peers such as Germany's Siemens or France's Alstom could also be considered, one of the sources said, pointing to a tie-up between China's biggest train makers CNR and CSR Corp last year that put pressure on rivals to gain scale.

Bombardier's transport arm provides rail vehicles, signaling and control equipment. The sources said the discussions are in early stages and Bombardier may delay any action until potential buyers such as Alstom and Hitachi have finished wrapping up recent transactions.

Quebec Economy Minister Jacques Daoust told Reuters he had been assured by Bombardier's controlling family in a telephone call on Friday that the Montreal-based company would not sell the transportation division entirely and that other options were on the table.

The discussions come as Bombardier's aircraft business battles with overruns in cost and development for its new CSeries jet, which has sent the firm's stock down 38 percent this year.

Bombardier shares jumped as much as 7 percent on the Reuters report, before retreating to close at $2.64 on the Toronto stock exchange, still up 1.5 percent from the previous day.

Bombardier spokeswoman Isabelle Rondeau noted that the company has previously said it is interested in "participating in consolidation" and that many options were on the table.   Continued...

A plane flies over a Bombardier plant in Montreal, January 21, 2014. REUTERS/Christinne Muschi