Estimated reading time 4 minutes, 18 seconds.
Mitsubishi Heavy Industries Ltd. (MHI) and Bombardier Inc. have entered into a definitive agreement, whereby MHI will acquire Bombardier’s CRJ regional jet program for a cash consideration of US$550 million, payable to Bombardier upon closing, and the assumption by MHI of liabilities amounting to approximately US$200 million.
Under the agreement, Bombardier’s net beneficial interest in the regional aircraft securitization program (RASPRO), which is valued at approximately US$180 million, will be transferred to MHI.
Pursuant to the agreement, MHI will acquire the maintenance, support, refurbishment, marketing, and sales activities for the CRJ Series aircraft, including the related services and support network located in Montreal, Que., and Toronto, Ont., and its service centres located in Bridgeport, W. Va., and Tucson, Ariz., as well as the type certificates.
This acquisition is complementary to MHI’s existing commercial aircraft business, in particular the development, production, sales and support of the Mitsubishi SpaceJet commercial aircraft family. The maintenance and engineering capabilities of the CRJ program will further enhance critical customer support functions, a strategic business area for MHI in the pursuit of future growth.
“As we outlined during the recent Paris Air Show, we are working hard to ensure that we provide new profit potential for airlines and set a new standard for passenger experience. This transaction represents one of the most important steps in our strategic journey to build a strong, global aviation capability,” said Seiji Izumisawa, president and CEO of MHI. “It augments these efforts by securing a world-class and complementary set of aviation-related functions including maintenance, repair and overhaul (MRO), engineering and customer support.
“The CRJ program has been supported by tremendously talented individuals. In combination with our existing infrastructure and resources in Japan, Canada and elsewhere, we are confident that this represents one effective strategy that will contribute to the future success of the Mitsubishi SpaceJet family. MHI has a decades-long history in Canada, and I hope this transaction will result in the expansion of our presence in the country, and will represent a significant step in our growth strategy,” Izumisawa concluded.
“We are very pleased to announce this agreement, which represents the completion of Bombardier’s aerospace transformation,” said Alain Bellemare, president and chief executive officer, Bombardier Inc.
“We are confident that MHI’s acquisition of the program is the best solution for airline customers, employees and shareholders. We are committed to ensuring a smooth and orderly transition.”
Bellemare continued: “With our aerospace transformation now behind us, we have a clear path forward and a powerful vision for the future. Our focus is on two strong growth pillars: Bombardier Transportation, our global rail business, and Bombardier Aviation, a world-class business jet franchise with market-defining products and an unmatched customer experience.”
The CRJ production facility in Mirabel, Que., will remain with Bombardier. Bombardier will continue to supply components and spare parts and will assemble the current CRJ backlog on behalf of MHI. CRJ production is expected to conclude in the second half of 2020, following the delivery of the current backlog of aircraft.
Bombardier will also retain certain liabilities representing a portion of the credit and residual value guarantees totaling approximately US$400 million. This amount is fixed and not subject to future changes in aircraft value, and payable by Bombardier over the next four years.
The transaction is currently expected to close during the first half of 2020 and remains subject to regulatory approvals and customary closing conditions.
The agreement contemplates a reverse break fee payable by MHI under certain circumstances.
And this is how a company gets dilapidated for short term profit and management bonus in mind. The transformation is complete and very sadly so.
This debacle will be studied for years to come.
Amen, to your critique. Avro revisited—Canada does it again for the aerospace industry. Our thanks to Viking, DeHavilland for holding on to their entrepreneurship.