Alstom Hints of a Possible Bombardier Acquisition

On Monday, France based transport infrastructure firm Alstom SA (EPA: ALSO) confirmed of a possibility to acquire the train business of Canada based company Bombardier Inc. (TSC: BBDb) in a deal believed to be worth $7 billion based on enterprise valuation.

“Alstom confirms being in discussions with Bombardier regarding a possible acquisition of Bombardier Transportation by Alstom. Discussions are ongoing. No final decision has been made,” said Alstom in a press statement.

This comes one week after Bombardier resolved to sell off its 33.5% stake in  A220 passenger jet program also known as Air Canada to the Quebec government and Airbus SE. (EPA: AIR).

After the deal was closed, Airbus increased its stake in the A220 passenger jet program from 50.1% to 75%. On the other hand, Quebec government increased its stake in the program to 25%.

Bombardier has been experiencing hard times trying to manage the higher rail costs generated by some of its tricky contracts which have left the company with backlog orders amounting to $36 billion.

Following a blocked merger between Alstom and German based train manufacturer Siemens AG (SIEX) analysts are seeing this acquisition as one which will help Alstom pose a more efficient competition to Chinese rail giant CRRC Corp Ltd (601766.SS).