French train engineer Alstom has signed a memorandum of understanding for the takeover of Canadian engineer Bombardier’s rail division.
The deal is expected to cost between €5.8bn and €6.2bn, with pension fund investor, Caisse de DépÃ´t et Placement du Québec (CDPQ) holding 32.5% of Bombardier Transportation and 18% of Alstom. French contractor Bouygues will continue to hold 10% of Alstom’s shares.
CDPQ will invest €2bn in Alstom following the deal, with €700m to follow.
The merger is due to go into effect in 2021, if allowed to proceed by regulators such as the European Commission, which ruled out a merger between Bombardier and Siemens in 2017.
Bombardier said in a press release that its aviation business would continue to operate under the Bombardier brand.
Alain Bellemare, Bombardier’s president, commented: "Today marks an exciting new chapter for Bombardier. Going forward, we will focus all our capital, energy and resources on accelerating growth and driving margin expansion in our market-leading $7bn business aircraft franchise.
"With a stronger balance sheet after the completion of this transaction, an industry-leading portfolio of products, a strong backlog, and a rapidly growing aftermarket business, we will compete in this market from a position of strength."
Henri Poupart-Lafarge, Alstom’s chairman, said: "Bombardier Transportation will bring to Alstom complementary geographical presence and industrial footprint in growing markets, as well as additional technological platforms. It will significantly increase our innovation capabilities to lead smart and green innovation."
The merger was first mooted in January.
Image: A Bombardier train (Bombardier)