BOMBARDIER INC. (Toronto symbols BBD.A $1.52 and BBD.B $1.43; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.7 billion; Market cap: $2.3 billion; Priceto- sales ratio: 0.2; Dividend suspended in February 2015; TSINetwork Rating: Speculative; www.bombardier.com) is the world’s third-largest maker of commercial aircraft, after Boeing and Airbus. It’s also a leading maker of passenger railcars.
The company recently formed a joint venture with the government of Quebec to build its new CSeries passenger jets.
Under the deal, the province will pay $1.0 billion for 49.5% of this business (all amounts except share prices and market cap in U.S. dollars).
The cash will help Bombardier finish testing the CSeries. It currently has firm orders for 250 of these planes.
That excludes the 45 planes that Air Canada recently agreed to buy. If Air Canada exercises its option for 30 additional planes, the entire 75-plane order would be worth $6.4 billion.
Bombardier is now looking for a similar investment from the federal government. If Ottawa does decide to invest, it would probably ask Bombardier to spin off the CSeries business as a separate company.
Under a separate deal, Bombardier received $1.5 billion when it sold 30% of its railcar division to the Caisse de dépôt et placement du Québec. It manages the province’s public pension plan.
The company now wants to consolidate its outstanding shares in a reverse stock split. That would raise the share price to between $10 and $20 (but reduce the number of shares each shareholder owns by the same factor).
Big institutional investors, such as pension plans, avoid stocks that trade below $1, so the move could discourage them from selling Bombardier stock. The company aims to complete the consolidation later this year, if shareholders approve it.
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The Successful Investor Inc. and its affiliate Successful Investor Wealth Management (referred to hereafter as TSI Network) know that you care how information about you is used and shared, and we appreciate your trust that we will do so carefully and sensibly. This notice describes our privacy policy. By visiting websites owned by or associated with TSI Network, you are accepting the practices described in this Privacy Policy.
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