Important investment in crisis | CDPQ must bail out Alstom

The Caisse de dépôt et placement du Québec (CDPQ) is loosening its purse strings to help Alstom get back on track. Despite the collapse of its multi-billion dollar investment in the French giant, Quebecers’ nest egg should reinject nearly a quarter of a billion into it.

In financial turmoil since the acquisition of the former railway division of Bombardier, Alstom is using major means to replenish its coffers and reduce its debt: it wishes to raise 1 billion euros (1.4 billion CAN) by issuing shares and 750 million euros (CAN 1.1 billion) through bonds.

The Fund did not publicize its decision. Rather, it was Alstom which revealed on Wednesday that the institution intended to contribute the amount of its stake (17.4%) in the company. This means that the Quebec manager would have to pay 174 million euros (255 million CAN).

“This is an important asset for the CDPQ and, through this intention to subscribe to this financing, we are playing our role as a long-term shareholder,” the Caisse indicated on Wednesday in a statement, without specifying the amount involved. .

The pension plan manager is the largest shareholder of the rolling stock manufacturer and has two representatives on its board of directors. In this context, the Caisse could hardly pass its turn, estimates Michel Magnan, professor at the School of Management at Concordia University.

“ [La Caisse] has access to internal information since she is on the board of directors, he said. If Alstom’s major shareholders don’t get on board, why would the others? This would compromise the success of the operation. The signal would be negative. »

Alstom’s second largest shareholder, Bpifrance (7.5%) will imitate CDPQ. In the short term, investors were reassured by the bailout announced by Alstom. On the Paris Stock Exchange, its action advanced 9.4%, or 1.47 euros, to close at 17.11 euros.

The derailment

Alstom became the owner of the former Bombardier railway division in January 2021. The French multinational’s shares were then trading at around 45 euros. CDPQ played a key role in this transaction. Owner of a third of Bombardier Transportation, it had converted its stake in Alstom in addition to purchasing shares of the French giant at a price of 40.67 euros.

The investment was then estimated at CAN 4.1 billion and considered one of the Caisse’s largest. Its value has since melted like snow in the sun. On Wednesday, it was around CAN 1.7 billion, a decline of 58%.

Alstom inherited the execution problems that had plagued Bombardier Transportation on major projects. The situation of the French multinational, however, deteriorated greatly on October 5 when it announced that its year risked ending with a hole of several hundred million in its cash flow.

A problematic contract which belonged to Bombardier Transportation was part of the reasons cited by the French giant. This was the Aventra programme, involving the delivery of 443 trains to five different customers in the United Kingdom.

“We are seeing the benefits of the efforts made by our teams to integrate Bombardier and increase efficiency to the levels we observed before the acquisition,” explained Alstom CEO Henri Poupart-Lafarge on Wednesday in a conference call with financial analysts.

Still work

The French manufacturer is not yet out of the woods: the integration of Bombardier Transport may take until next year. If this schedule is respected, it will have taken him four years to digest his last big catch.

According to Ivan Tchotourian, professor at the Faculty of Law at Laval University specializing in business law, governance and social responsibility, CDPQ probably did not expect to have to reinvest in Alstom after setting the table for the important transaction. from three years ago.

“She must not have expected it,” he said. It was not an obligation, but afterwards, going to explain, as the main shareholder present at the board of directors, that you have not invested, it can be complicated. We would also have made the task more difficult for Alstom. »

In parallel with the financial operation announced Wednesday by Alstom, the French giant sold 700 million euros (1 billion CAN) of assets. In particular, it sold its North American signaling activities last month.

The multinational ended its financial year, which ended on March 31, with a cash consumption of 557 million euros. In 2022, the company posted a surplus of 200 million euros.

Its adjusted loss amounted to 309 million euros in 2023, while its debt is close to 3 billion euros. To ease pressure on its finances, Alstom also wants to suspend its dividend during its next financial year.