Quebec Invests $1.5 Billion in Bombardier for Rail Slice Getty Images

Quebec Invests $1.5 Billion in Bombardier for Rail Slice

Canada's second-largest pension fund made the investment in exchange for a 30% in the company's rail subsidiary, Bombardier Transport.

MONTREAL—Quebec made a second cash injection in a month Thursday into manufacturer Bombardier, which gave up a stake in its rail unit for the funding to get its fledgling CSeries jetliner program off the ground.

The Caisse de dépôt et placement du Québec (CDPQ), Canada's second largest pension fund, agreed to pour $1.5 billion into Bombardier in exchange for a 30% stake in its rail subsidiary Bombardier Transport.

Bombardier Transport in turn would be spun off into a separate entity registered in Britain, with its headquarters remaining in Berlin.

The deal values the new Bombardier Transport holding company at $5 billion, and concludes a review of financing options that included an initial public offering and auctioning off a minority stake in the rail unit.

Lutz Bertling will continue leading the rail unit, but he will now report to a new independent board that will include three out of seven members named by the CDPQ.

This comes on the heels of a $1 billion lifeline to Bombardier on October 29 to bring the first all-new, medium-range passenger jet in 25 years to market as costs of the CSeries skyrocket amid a two-year development delay.

Quebec received a 49.5% stake in a limited partnership formed with Bombardier to complete the CSeries program.

The medium-haul, single-aisle planes with 100 to 150 seats are scheduled to carry their first passengers for Lufthansa subsidiary Swiss in the middle of next year, and go head to head with the workhorses of the aviation market, the Airbus A320 and Boeing 737.

Bombardier has also asked Ottawa for money.

The CDPQ operates at arm's length of the Quebec government with a mandate to foster local economic growth.

Bombardier's rail unit employs 39,700 people worldwide and has a $30 billion order backlog, according to the company.

The investment by CDPQ, Bombardier president Alain Bellemare said in a statement, "is a testimonial to the growth potential of the rail industry and to Bombardier's leadership in seizing the opportunities this market offers on a global scale."

Copyright Agence France-Presse, 2015

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