Guests tour a Bombardier CS100 plane during an event at the company’s facilities in Toronto last month. Talks with Airbus about sharing ownership of the C Series program broke off on Tuesday.Darren Calabrese/The Globe and Mail
Bombardier Inc. is hunting for financial and strategic partners to help fund its plane programs, but its founding family opposes any effort to diminish their control of the company, a well-placed source said.
"People are dreaming" if they think the founders will entertain any suggestion that they loosen their grip on Bombardier and make changes to their supervoting shares, the person said.
There has been no weakening of their resolve over the years to maintain control over the company, the source added.
The Montreal-based manufacturer, the world's only maker of both planes and trains, is exploring a range of options to cut its $9-billion (U.S.) debt and put the company on more solid permanent footing.
The effort, including exploratory talks with Airbus Group NV on sharing ownership of Bombardier's C Series jet program, isn't a last-ditch act of desperation by a company seeking an emergency rescue for the C Series, one person familiar with the matter has said. Rather, it's part of a wider attempt to improve its balance sheet and fund longer-term needs at a time when its earnings and cash intake are under significant pressure.
The person described it as "a security blanket" for the years ahead as Bombardier pushes through the early difficulties of C Series production and works to develop the new Global 7000/8000 business jet. With access to $4.4-billion in short-term capital, Bombardier has sufficient resources to bring the C Series to market, the person said.
But a partnership with Airbus could offer things Bombardier couldn't achieve on its own, including all of the benefits from bringing a major competitor onside.
Talks with Airbus broke off on Tuesday at the insistence of the European plane maker after they became public. They could resume because the idea of a partnership is said to have enjoyed significant support among some of the senior people involved.
Partnering with Airbus is only one of a number of avenues Bombardier is scouting.
Sources confirm the company is also talking to pension fund manager Caisse de dépôt et placement du Québec about an investment. After a rift between two pillars of Quebec Inc. earlier this year, the two appear to be on friendlier terms of late.
The Caisse is among Bombardier's largest shareholders, with 41.6 million class B shares and 5.7 million class A shares at the end of 2014, Bloomberg data show. It does not have a seat on the board.
According to a credible account of Bombardier's February equity sale provided to The Globe and Mail, the company offered the Caisse an opportunity to be lead investor but resisted when the pension fund manager made several unexpected requests as a condition of its investment. Among those requests was a weakening of Bombardier's long-standing dual-class share structure, which gives the founding Bombardier-Beaudoin family 54-per-cent control over voting rights through a special class of shares. In the end, the Caisse bought only a token amount of shares as part of the sale.
Bombardier's bargaining position would appear much diminished from February, as the company turns to the pension fund for an investment for the second time in less than a year. But it's unclear if Bombardier's ownership structure is being challenged now as it was then.
The relationship between Bombardier and the Caisse was never as toxic as it was made out to be, one person said, adding the proof is that the two are talking again about an investment. "There's no drama on the table. There's just a [potential] deal," the person said.
A spokeswoman for Bombardier and an official with the Caisse both declined to comment on Thursday.
"Quebec has a lot to lose if this thing flies apart," said Todd Johnson, a portfolio manager at BCV Asset Management Inc., which holds Bombardier bonds. "If I'm thinking this through logically, you need a large equity investment of some large patient investor."
Bombardier posted its first loss in a decade last year and has struggled to win new orders for its planes through the first six months of 2015. In May, Caisse chief executive Michael Sabia urged investors to give Bombardier CEO Alain Bellemare more time to turn the company around. "Markets are impatient, but you have to give Mr. Bellemare and the Bombardier management team the chance to do some things."
Nicolas Van Praet