February 7, 2012 / 6:13 PM / 6 years ago

Bombardier shares rise on report of China deal

(Reuters) - Shares of Bombardier (BBDb.TO) rose more than 3 percent on Tuesday boosted by a newspaper report that it was poised to sign a deal that could give the Canadian planemaker deeper access to China’s fast-growing aviation market.

Germany’s Handelsblatt newspaper said on Tuesday that Bombardier was close to clinching a far-reaching agreement with state-owned Commercial Aircraft Corp of China (Comac) involving its new C-Series passenger plane and Comac’s C-919 jet.

The report comes as Prime Minister Stephen Harper begins a high-profile trade mission in Beijing, aimed at building closer ties with China and boosting Canadian exports.

Without giving its source, Handelsblatt also said there were discussions about Comac taking a stake in Bombardier’s commercial aviation unit, but a Bombardier spokeswoman denied this.

There was “a miscommunication and no we do not intend to sell our commercial aircraft division”, Haley Dunne said in an email.

If Bombardier “could have access to the Chinese market through a joint venture, it would be a huge boost to the program,” Stonecap Securities analyst Scott Rattee said.

“It’s a huge single client,” he said.

The aircraft maker’s chief executive, Pierre Beaudoin, is part of the high-powered business delegation accompanying Harper.

Bombardier, the world’s third biggest commercial aircraft maker, signed a framework agreement last March with Comac to collaborate on commercial aircraft. But details on what the parties would co-operate on have been vague.

Closer ties with Comac have “the potential to de-risk the C-Series program and provide it with priority access to the Chinese market, which is believed to constitute close to 18 percent of the aircraft addressable market over the next 20 years,” BMO Capital Markets analyst Fadi Chamoun said in a research note to clients.

Bombardier is less than two years away from launching the C-Series, its bold, $3 billion plan to build its biggest plane yet and take on industry giants Boeing (BA.N) and AirbusEAD.PA.

But sales of the narrow-body jet, aimed at the 100- to 149-seat market, have been sluggish and weighed on Bombardier’s stock price.

Bombardier shares were up 15 Canadian cents, or 3.22 percent, at C$4.81 on the Toronto Stock Exchange early Tuesday afternoon. The stock has lost 25 percent of its value in the past year.

Reporting By Nicole Mordant in Vancouver; editing by Rob Wilson

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