France: Alstom has filed a request for arbitration with the International Chamber of Commerce, which will concern the violation of certain provisions of the deal for the sale of the railway industry division of the Bombardier. The French producer does not elaborate on its claims in the official press release and declines to comment further on this process due to its confidential nature.
In turn, Bombardier acknowledged receipt of the notice of commencement of arbitration proceedings and stated that it has every reason to defend itself against Alstom’s claims. In addition, as part of the case, the company intends to challenge the reduction in the cost of the sale of Bombardier Transportation. Initially, Alstom planned to pay Bombardier €5.8-6.2 bln, but later the value of the deal decreased to €5.5 bln. The French company justified this with a larger share of unprofitable contracts in Bombardier Transportation’s order book, as the company has been aggressive in the market over the past few years, submitting bids for tenders at a reduced price. Bombardier estimates that the Alstom litigation could take several years. it will also refrain from further comment on the case.
Alstom completed its takeover of Bombardier Transportation in January 2021, becoming the world’s second largest rolling stock manufacturer after CRRC. At that time, the total backlog of both manufacturers was at the level of €71.1 bln, the total revenue for the fiscal year 2019/2020 was €15.7 bln. For the past fiscal year 2021/2022, the backlog of a united company increased to €81 bln.
As part of the takeover, Alstom set a goal of achieving a synergistic effect of €400 mln per year in 4-5 years. However, already six months after the completion of the transaction, the CEO of the company, Henri Poupart-Lafarge, in an interview with the newspaper Le Figaro, said that Alstom hopes to deal with the problematic portfolio of Bombardier orders that it inherited in the next two or three years, many of which turned out to be unprofitable or difficult to exercise. In another interview recorded a year after the takeover by BFM Business, Poupart-Lafarge said the company had to spend €1.5 bln to pay off Bombardier suppliers and restart halted train lines. Also during the year, Alstom actively canceled distressed and unprofitable contracts entered into by the Canadian producer.
Presentation of Coradia Polyvalent EMU for the Leman Express regional passenger rail services in 2019. Source: Jean Schweitzer, Alstom
Disputes between the companies may also be due to the presence of interconnected transactions with Hitachi Rail and CAF, to which Alstom must sell a number of assets within the framework of the behavioral conditions established by the European Commission. Thus, Hitachi Rail will receive Bombardier’s share in the production of the high-speed V300 Zefiro in Italy. The requirement to dispose of this asset is intended to ensure the stability of deliveries for the HS2 high-speed line project in the UK. The deal is scheduled to close in the first half of 2022.
In turn, CAF will acquire the Alstom plant in Reichshoffen, France, and the intellectual rights to the Coradia Polyvalent train platform produced there, as well as part of the Bombardier Transportation site in Hennigsdorf, Germany, along with the intellectual rights to the Talent 3 trains. This transaction should be closed before September.
