Bombardier Inc’s plans to sell a minority stake in its rail unit via an initial public offering in Germany have been put on the back burner and any listing may now only occur in the second quarter of next year, said four sources familiar with the matter, Reuters reported.
With Bombardier running a dual-track process on the asset, the sale of a minority stake to a single entity or consortium is emerging as a more viable option, said the sources, who were not authorized to publicly discuss the matter.
A Bombardier spokeswoman said on Friday the company still intends to file its IPO documentation before the end of 2015, but that the timing of any IPO would be contingent on market conditions.
In May, Bombardier had said it was aiming to launch an IPO in the fourth quarter. In June, the head of the rail unit said the company would be ready to list in the fourth quarter, but may do it a bit later if conditions were not ideal. In Germany, two large corporations recently had to trim their IPO plans in volatile markets, while another pulled an IPO altogether.
Two of the sources said Bombardier has received plenty of interest in the rail asset from foreign strategic buyers, along with private equity and pension funds. An IPO or sale would help it raise cash to tackle cost overruns in its CSeries jet program. “The resources are all directed towards a stake sale now,” said one Canadian-based source. Bombardier turned down an offer from China’s Beijing Infrastructure Investment to buy up to 100 % of the prized rail unit, Reuters reported last month.
Earlier this month Reuters reported that Bombardier was in talks with the Caisse de depot et placement du Quebec, which manages Quebec’s public pension plans, on a deal that could help inject more cash into the troubled company.
Two US banking sources said other Canadian pension funds and private equity funds have also looked at the rail asset, but said the majority stake held by the Bombardier-Beaudoin family has deterred some potential investors.
The family own about 85% of Bombardier’s Class A shares, which have 10 times as many votes as its B shares. In conjunction with the Class B shares, the family has a 53% voting stake in Bombardier.
One Canadian source said that the company could attempt to overcome the controlling stake hurdle, by also selling an equity stake in Bombardier to any fund or group that buys the minority stake in the rail asset.
Bombardier, which issued C$3.35 billion (US$2.59 billion) in debt and equity capital in February, built in a buffer for another sizable issue of either Class A or Class B shares.
When it sought shareholder authorization for the February issue, it got approval to issue up to 2.74 billion shares. Its February issuance took its outstanding share count to roughly 2.23 billion.
Bombardier can still issue roughly 500 million Class A or Class B shares, the equivalent of an approximately 22% dilutive equity issue, without seeking any further shareholder approvals.
Bombardier confirmed that it does have the authorization to do an equity issue if it wants, but declined to comment on its talks with any parties.
