Bombardier to Sell Jet Unit -- WSJ
June 26 2019 - 3:02AM
Dow Jones News
Company exits the commercial-passenger aircraft business with
the Mitsubishi deal
By Paul Vieira
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (June 26, 2019).
Mitsubishi Heavy Industries Ltd. said it would acquire
Bombardier Inc.'s regional-jet business for $550 million in a
transaction that puts the companies on different paths in the
aviation sector.
The deal unveiled Tuesday marks the Canadian company's exit from
the commercial passenger-aircraft business following failed bets
that it could compete with Airbus SE and Boeing Co. in the 100-seat
single-aisle plane category.
Bombardier has restructured its aviation division over the past
two years, highlighted by its joint venture with Airbus that put
the European plane maker in charge of the production and sales of
the 110- to 130-seat planes that the Montreal company had
originally conceived as the CSeries. Those jets are now rebranded
as the Airbus A220.
Just a few weeks ago, Bombardier confirmed the closing of
another aviation deal in which it unloaded its Q Series turboprop
aircraft to an affiliate of Longview Aviation Capital Corp.
Bombardier will now focus on its business-aircraft franchise and
its rail division.
The deal "represents the completion of Bombardier's aerospace
transformation," said Chief Executive Officer Alain Bellemare. "We
are confident [Mitsubishi Heavy's] acquisition of the program is
the best solution for airline customers, employees and
shareholders."
Shares of Bombardier rose nearly 3% in early Tuesday trading.
Bombardier said it would assemble the remaining backlog of roughly
30 regional jets on behalf of Mitsubishi Heavy, with work expected
to conclude in late 2020. A Bombardier spokesman said the company
hopes the affected 350 workers at its Mirabel, Quebec, plant can be
redeployed within the organization to other jobs, including the
possibility of a transfer to Airbus.
As part of the deal, Mitsubishi will assume $200 million in
Bombardier liabilities and receive $180 million credit from
Bombardier related to bank financing.
Meanwhile, Japan's Mitsubishi said the deal represents the next
step to expanding its aerospace and defense business. The unit lost
money in its last fiscal year, squeezed by investment in its new
SpaceJet regional aircraft and from commercial customers -- notably
Boeing on the 787 -- and military partners, with Lockheed Martin
Corp. set to take on the rest of the F-35 assembly destined for
Japan's Self-Defense Forces.
The deal underscores Mitsubishi's interest in the sales and
support network linked to Bombardier's regional-jet program as the
Japanese plane maker tries to clear a path to market for its
SpaceJet.
The company rebranded the plane at the recent Paris Air Show,
with a new model targeted at the U.S. market, where pilot contracts
restrict the size of aircraft. The first delivery of the SpaceJet
to All Nippon Airways parent ANA Holdings Inc. is set for mid-2020,
or some eight years behind schedule, with the new model set to
arrive in 2023.
"This transaction represents one of the most important steps in
our strategic journey to build a strong, global aviation
capability," Seiji Izumisawa, Mitsubishi Heavy's CEO, said in a
statement issued by Bombardier. He added the deal also augments the
company's efforts to secure aviation-related functions including
maintenance and repair support.
Mitsubishi is testing the SpaceJet in the U.S. but hasn't said
where it would assemble the planes. Analysts said the Bombardier
deal opened up Bombardier's Mirabel facility as a potential site,
given possible demand from North American carriers, as well as
sites in the U.S. including Alabama and Texas.
"Future plans will be announced once the transaction is closed
in early 2020," said a Mitsubishi spokesman, who declined to
comment further.
--Doug Cameron and Robert Wall contributed to this article.
Write to Paul Vieira at paul.vieira@wsj.com
(END) Dow Jones Newswires
June 26, 2019 02:47 ET (06:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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