Alstom reaches US$7 bil deal for Bombardier train unit

TORONTO: French train giant Alstom SA has reached a preliminary deal to acquire Bombardier Inc’s train business for more than US$7 billion, the Wall Street Journal reported, citing people familiar with the matter.

The discussions, first reported by Bloomberg News on Jan 21, began before Bombardier surprised the market last month by warning of disappointing fourth-quarter sales.

If terms are completed, the deal could be announced as early as Monday, according to the Journal report.

Alstom is expected to buy the unit using mainly cash and some stock component. Quebec pension firm Caisse de Depot et Placement, which owns 32.5% of Bombardier’s train unit, has agreed to sell its stake to Alstom and acquire a minority holding in the combined train company, the report added.

Alstom going ahead with a deal could allow the French company to avoid paying a material premium due to Bombardier Transportation’s cash needs and recent project delays, according to a Bloomberg Intelligence report last week.

Alstom shares climbed 15% since the start of the year, while Bombardier dropped 13%.