- Bombardier Transport IPO is scheduled for fourth quarter
- Reported offer gave unit a value of as much as $8 billion
Bombardier Inc. surged the most in almost 27 years amid growing optimism over the potential value of the company’s rail unit and sales prospects for the CSeries jet.
Bombardier rejected a proposal by Beijing Infrastructure Investment for 60 percent to 100 percent of Bombardier Transportation that gave the business an enterprise value of as much as $8 billion, Reuters reported, citing an Aug. 14 letter outlining the bid. Bombardier, with a market value is about $2.5 billion, is planning an initial public offering of the unit during the fourth quarter to help reduce debt swelled by the development of the CSeries.
“This makes the IPO valuation that much more interesting," said Chris Murray, an AltaCorp Capital analyst who had an estimated value for the rail unit of $6.1 billion. “The valuation this company would attract would likely be much higher than where the stock trades today."
The widely-traded Class B shares jumped 24 percent to C$1.47 at the close in Toronto, the most since September 1988. Bombardier had lost 65 percent of its value this year through Tuesday.
Interest in the CSeries from would-be buyers has been "overwhelming" since the Paris Air Show in June, according to slides from a speech made Wednesday by Fred Cromer, president of Bombardier’s commercial aircraft unit, at a Deutsche Bank conference on aircraft financing in New York.
Bombardier is seeing “heightened interest and sales discussions with marquee airlines who are starting to see what this aircraft will do for them," according to the slide presentation.
As for the rail business, Bombardier Wednesday reiterated that the unit is not for sale.
“We are exploring initiatives such as potential participation in industry consolidation, but we will not discuss our activities in this regard or speculate on any potential outcome," spokeswoman Isabelle Rondeau said in an interview.
Rondeau declined to comment on the reported approach by Beijing Infrastructure. In July, Bombardier also denied a report that it was in merger discussions with Siemens AG over the unit.
Beijing Infrastructure’s reported offer values Bombardier Transportation at 10.4 times next year’s earnings before interest, taxes, depreciation and amortization, Murray said. "Independent of aerospace, there is certainly some pretty heavy value there," he said.
Still, any transaction would face “immense" regulatory scrutiny from multiple jurisdictions including governments in Quebec, Canada and the European Union, Murray said.
“It would not be a simple transaction to pull off," he said.