The rationalisation of the world rail equipment industry took a big step forward yesterday as Bombardier of Canada agreed to acquire DaimlerChrysler's Adtranz subsidiary for $725 million (€801.64 million) in cash.
The transaction lifts Bombardier's transportation division, already the North American market leader, to the top of the £25 billion sterling industry, ahead of Alstom of France. The combination will create a rail equipment unit with C$8.4 billion in annual revenues and a C$22.4 billion order backlog.
"This deal puts them head and shoulders above the next major competitor on a global basis," said Ted Larkin, an analyst at HSBC Securities.
The acquisition will boost Bombardier's product range, marrying the Canadian company's expertise in passenger cars and urban transport systems with Adtranz's locomotive and electrical capabilities. It will also provide Bombardier's transportation unit, which accounted for 25 per cent of the group's C$13.6 billion in sales last year, with the latest high-speed train technology. The addition of Adtranz will extend Bombardier's geographical coverage in Europe, where its activities are concentrated on some former East German wagon building businesses.
Bombardier, already the world's third-largest civilian aircraft maker and the owner of Shorts in Belfast, said the acquisition would not have an impact on earnings this year but would add to them as of the 2002 fiscal year beginning in February next year.
The transaction marks the end of DaimlerChrysler's drive to rationalise and turn round its chronically loss-making rail equipment business, and leaves the group free to concentrate on its core automotive side.
DaimlerChrysler said the deal would have a positive impact on its results, through a substantial one-off gain on the transaction. Mr Manfred Bischoff, the DaimlerChrysler board member responsible for Adtranz, said the official sale price understated the value of unspecified tax benefits, which would lift the full "economic value" of the deal to more than €900 million. He said the tax advantage of Adtranz's significant losses, believed to be about €1 billion , would go to Bombardier.
Bombardier said it would finance the acquisition with its strong cash flow and that it could soon divest Adtranz's signalling and trackside equipment business units.
