Skip to main content

Caisse de dépôt buy a 30-per-cent stake in Bombardier Inc.’s rail business for $1.5-billion as the Canadian manufacturer finished a review of strategic options for the operation.Jason Alden/Bloomberg

Bombardier Inc.'s $1.5-billion (U.S.) deal to sell 30 per cent of its train business to pension fund giant the Caisse de dépôt et placement du Québec will shore up the company's cash position and could speed up other changes in the months ahead like a board-level shakeup.

The founding family's control over Bombardier remains unchanged.

But bringing in the Caisse as a partner shows that the company isn't deaf to investor concerns.

"Today marks an evolution" at Bombardier, Caisse chief executive Michael Sabia said in an interview, adding that the Caisse has won certain rights with the private placement and intends to be a vocal partner at the level of both the parent company and the train subsidiary. "We intend to encourage a focus on performance."

It's the second cash boost for Bombardier in the space of a month and comes on the heels of a $1-billion investment from the Quebec government in Bombardier's flagship C Series aircraft program. The Caisse said it was never interested in investing in the C Series, but Bombardier will use some of the Caisse money to fund the jet's development, so the proceeds will be directed there anyway.

The dual cash injections should help buttress Bombardier in its effort to get the C Series to market and ramp up costly initial production. The company has struggled to win new orders for the plane in recent months, in part because potential clients were looking for more certainty about its financial health. Big airlines wanted to be sure Bombardier has the capability to build the planes they order as quickly as possible before putting in orders, said William Blair analyst Nicholas Heymann.

With the Caisse funds, Bombardier will have $6.5-billion in short-term capital resources. That's enough to complete all its current plane development programs and set up a buffer should industry conditions sour, said Bombardier chief executive Alain Bellemare. Bombardier's other top plane priority is developing the new Global 7000/8000 luxury jets.

"We have now de-risked Bombardier," said Mr. Bellemare.

The company's effort to win a meaningful investment from the Canadian government in the C Series continues independently of the Caisse announcement, Mr. Bellemare said. Innovation Minister Navdeep Bains said Thursday that Ottawa would take a "holistic approach" to making a decision, including considering Bombardier's business model as well as the impact on the economy and jobs.

Shares in Bombardier inched up 0.4 per cent to $1.29 in Toronto trading. They've lost 70 per cent of their value since January.

Although their immediate impact might not be felt, the Caisse won two key conditions for its investment that may open the door to further governance changes at Bombardier Inc. down the road.

First, Bombardier agreed to maintain a $1.25-billion minimum cash reserve at all times – a way for the Caisse to protect its investment in the train business by ensuring the financial stability at the parent level. If cash falls below that threshold, that triggers action by a special committee of directors approved by the Caisse to restore the liquidity.

Second, Bombardier agreed to "work collaboratively" with the Caisse and seek its agreement on final candidates in the selection process for new independent directors to Bombardier's board. Currently, eight of the company's 14 board members are independent. Mr. Sabia said Bombardier has made board renewal a priority and he expects to see changes in who sits on the board going forward. He declined to comment when asked whether the Caisse would push for more governance changes, such as the company's dual class share structure.

As heirs to company founder Joseph-Armand Bombardier, who invented the snowmobile, members of Quebec's Beaudoin-Bombardier family control Bombardier through a special class of stock that carries 10 votes a share.

The arrangement, which gives the family roughly 53 per cent of the voting rights and several board seats, has long been criticized for perpetuating bad management and failing to deliver acceptable returns for shareholders. Supporters of the system say it has provided long-term stability and serves to thwart any takeover attempt, which could result in the breakup of Bombardier.

As Bombardier began wobbling earlier this year after its first loss in nearly a decade, the family agreed to a management change to reassure investors. Mr. Bellemare was hired to lead a turnaround and Pierre Beaudoin, the chief executive at the time, became executive chairman.

But the family has always firmly opposed any efforts to diminish its control of the company. When the Caisse requested a weakening of the dual class share structure early this year as a condition to be lead investor in Bombardier's equity sale, the plane maker resisted, according to a credible source.

Thursday's deal suggests Bombardier's ownership structure remains a non-starter, but that any lingering bad feelings between the two partners have been largely buried. The Caisse wins board representation at the train unit as part of its investment. And at the parent company, it wins indirect influence over the board of directors.

"It was obvious for the last several weeks that not only were management changes required at Bombardier but that governance changes were also required," said Louis Hébert, a strategic management specialist at Montreal's HEC business school. "This will change things. The fact that Pierre Beaudoin brought in Bellemare tells you a lot about what the family is prepared to do to make this work. Now it may be time to make way for new faces on the board."




Design, manufacturing and engineering services for aircraft and related products for business, commercial and specialized markets



Products and services

  • Business aircraft: Learjet, Challenger and Global aircraft families
  • Commercial aircraft: C Series, CRJ Series and Q Series
  • Engineering services: Aircraft structures, component repair and other services
  • Amphibious aircraft: Bombardier 415 and Bombardier 415 MP Specialized aircraft modifications
  • Aircraft services: Parts, maintenance, training, technical support and publications


Design, manufacturing and support for rail cars and systems ranging from complete trains to subsystems, maintenance services, system integration and signalling.



Products and services

  • Rail vehicles: Automated people movers, monorails, light rail vehicles, rapid transit, metros, commuter/regional trains, intercity/high-speed trains and locomotives
  • Propulsion and controls: Complete product portfolio for applications ranging from trolley buses to freight locomotives
  • Wheels and axles: Products for the entire range of rail vehicles
  • Services: Fleet maintenance, operations, vehicle refurbishment and modernization, material management
  • Transportation systems: Customized “design-build-operate-maintain” transportation system solutions
  • Rail control: Signalling for mass transit and mainline systems

Source: Bombardier

Follow related authors and topics

Authors and topics you follow will be added to your personal news feed in Following.

Interact with The Globe