Quebec pension fund to buy stake in Bombardier rail arm for $1.5 billion

Thu Nov 19, 2015 5:12pm EST
 
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By Allison Lampert and Euan Rocha

MONTREAL/TORONTO (Reuters) - Quebec's public pension fund manager will buy a 30 percent stake in Bombardier Inc's BBDb.TO rail business for $1.5 billion in the troubled company's latest bid to provide a bigger cash cushion for its troubled planemaking unit.

The infusion from the Caisse de depot et placement du Quebec (CDPQ) is the second financing deal Bombardier has struck in recent weeks, as it makes a final push toward the launch of its long-delayed CSeries jet program.

After the latest deal closes in the first quarter of 2016, the unit that makes passenger railcars and locomotives will be governed by a seven-member board, with three nominees being named by Caisse, the companies said on Thursday.

The Caisse, which has had concerns in the past with the grip the Bombardier-Beaudoin family have over the parent company with their super-voting shares, also extracted some other commitments as part of the deal, including assurances around the maintenance of specific cash reserve levels.

"It's structured almost like a private equity investment, as opposed to a pure long-term equity investment," said AltaCorp analyst Chris Murray. "It has got protections in there that are interesting."

The fund also won the right to vet new independent directors named to the parent company's board, but in an interview Caisse Chief Executive Michael Sabia said it would not aim for direct board representation but rather push for qualified outsiders.

"What we want, and I think what Bombardier wants, are solid directors with experience and a performance focus. They're going to take that company forward, they are going to build a culture that needs to be built," he said. "That's good for everybody."

The fund is also receiving 105.85 million warrants that are convertible to the company's more widely held Class B shares and would give it a further 4.5 percent equity stake in the parent.   Continued...