Bombardier Inc., cashing in on its comeback, plans to sell C$638.4 million ($492 million) in shares as Canada’s biggest aerospace company pushes ahead with a five-year turnaround plan.
Bombardier is taking advantage of a 31 percent gain in the stock this year—the second best performance in Canada’s benchmark S&P/TSX Composite Index—to strengthen its balance sheet, which is saddled with $9.2 billion in long-term debt. The stock sale comes less than three weeks after the company reported better-than-expected fourth-quarter results amid signs of a rebound in business jets.
Proceeds will be used to supplement working capital and for general corporate purposes, “thereby building further operational flexibility and re-equitizing the balance sheet,” the company said. Bombardier ended 2017 with a $3.1 billion cash balance, which the company said leaves it “well positioned” to break even on a cash-flow basis this year—a key goal of Chief Executive Officer Alain Bellemare’s turnaround plan.
The maker of planes and trains will sell 168 million of its widely traded Class B shares at C$3.80 apiece, 4.5 percent less than Monday’s closing price in Toronto, Montreal-based Bombardier said in a statement. The offering is expected to be completed by March 23.
Free cash flow increased 76 percent to $872 million in the fourth quarter, the company said Feb. 15 as it reported earnings. That exceeded analysts’ expectations for the closely watched figure. For all of 2017, Bombardier burned through $786 million in cash, better than the $1 billion that the company had expected to use.
Credit Suisse Securities, National Bank Financial, UBS Securities Canada and TD Securities are leading the stock sale. The underwriters have an option to purchase another 25.2 million shares at any time up to 30 days after closing of the offering. That would increase total proceeds to C$734 million.
Bombardier gained 0.5 percent to C$3.98 in Toronto Monday, raising its market value to C$8.95 billion. The S&P/TSX advanced 1 percent.
