Alstom Said to Name BofA, Deutsche Bank on Rail Unit Sale
Alstom SA (ALO), the French builder of trains and power plants, named Bank of America Corp. and Deutsche Bank AG to prepare the sale of a minority stake in its rail business, according to people familiar with the matter.
Alstom has yet to decide whether it will sell part of Alstom Transport to a partner or on the stock market, said the people, who asked not to be identified because the details aren’t public. The divestiture won’t happen before Alstom releases full-year earnings in May, one person said.
Asset disposals of as much as 2 billion euros ($2.72 billion) are part of Alstom’s plans to shrink spending and keep a lid on debt. Alstom, based in Levallois-Perret near Paris, said Nov. 6 that industry and private-equity buyers might be among suitors for a minority stake in Alstom Transport, which makes trains, subway cars, trams and signaling systems.
Chief Executive Officer Patrick Kron has said divestitures would help Alstom regain some “strategic mobility” and strengthen its balance sheet in a “low-growth” environment.
Virginie Hourdin, an Alstom spokeswoman, said the company had no comment about the rail business. Spokeswomen for Bank of America and Deutsche Bank declined to comment on Alstom.
Sales at Alstom Transport were little changed from a year earlier in the six months ended in September at 2.78 billion euros, and the operating margin rose to 5.6 percent of revenue from 5.3 percent.
Alstom shares rose 3.3 percent this year through today, valuing the company at 8.4 billion euros. The stock dropped 12 percent last year, trailing the 18 percent gain for the French benchmark CAC 40 index.
In November, Alstom mandated Goldman Sachs Group Inc. (GS) to explore a sale of its air preheaters and gas-gas heaters unit, according to people familiar with the matter. That business makes products used by power plants and boiler companies.
Alstom also plans to reduce costs by as much as 1.5 billion euros by April 2016 as demand for gas turbines weakens and pricing pressure hurts profit from onshore wind turbines and power-transmission gear. The pullback includes cutting 1,300 jobs, mainly in Europe.
Kron has said the reductions will affect the information-technology department and the boiler unit, and may be extended to other operations if needed.
Moody’s Investors Service in June cut Alstom’s long-term credit rating by one level to Baa3, the lowest investment grade. Standard & Poor’s, which gives Alstom debt its second-lowest investment rating of BBB, has said it may make a similar move.
Alstom’s debt includes 4.65 billion euros in bonds, according to data compiled by Bloomberg.
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