Bombardier stock soars on big NetJets order
(Reuters) - Shares in Bombardier Inc jumped on Tuesday on news that the Canadian planemaker had won what analysts said was the biggest business jet order in its history.
NetJets, a private jet-sharing company owned by Warren Buffett's Berkshire Hathaway Inc, said late on Monday it would buy up to 425 new business jets from Bombardier and from U.S. plane-maker Cessna Aircraft Co in a $9.6 billion deal to renew its North American and European fleets.
Bombardier's portion of the order is worth up to $7.3 billion and includes up to 275 of the company's Challenger business aircraft. The transaction comprises 100 firm orders on two different types of Challenger jets, and options for 175 more.
"The market has been aware that Bombardier was a contender for the NetJets mid-size jet order, but the magnitude of the order is likely much larger than market expectations," said National Bank Financial analyst Cameron Doerksen in a research note to clients.
Montreal-based Bombardier has also signed a long-term service agreement with NetJets that could be worth an extra $2.3 billion if all of NetJets' options on Bombardier aircraft are exercised.
All in, the deal could be worth $9.6 billion for Bombardier, more than a full-year's revenue for the company's aerospace division.
Bombardier's shares rose as high as C$4.02 in busy early morning dealings on the Toronto Stock Exchange, a gain of 10 percent. By late morning the gain had been pared back to a 6.6 percent rise to C$3.89.
The surge is a welcome boost for the stock, which was down 46 percent in the past year on concerns about slumping orders for its commercial planes and slow orders for its new C-Series commercial jet.
Cessna, the world's largest maker of business jets, is a subsidiary of Textron Inc. Textron's stock was 2.8 percent higher at $24.24 on the New York Stock Exchange. Continued...