Alstom says Bombardier rail problems may affect terms of deal as talks continue

MONTREAL – French rail giant Alstom SA is warning that problems at Bombardier’s train division may affect negotiations to buy it, but says it still plans to go ahead with the takeover deal.

Alstom says that “negative developments” around the train unit’s operations and finances revealed in Bombardier’s quarterly earnings report last week have prompted the would-be buyer to “take into account the consequences” during upcoming discussions.

On Thursday, Bombardier reported an additional charge of US$435 million at its rail business, largely related to costs at late-stage projects in the U.K. and Germany.

Late last month the European Commission gave the green light to Alstom’s US$8.2-billion purchase of the Bombardier train unit following an investigation that found the transaction raised serious competition issues, prompting “significantly improved” commitments from Alstom, according to European competition authorities.

A Bombardier spokesperson says it is complying with all the conditions of the deal and that it will continue to work toward signing the final agreement as soon as possible.

The sale, which would help ease Bombardier’s US$9.3-billion debt, was initially slated to close in the first half of 2021.

Bombardier shares dropped a penny to 41 cents in midday trading Monday on the Toronto Stock Exchange.

This report by The Canadian Press was first published Aug. 10, 2020.

Companies in this story: (TSX:BBD.B)