Officially Announced Wednesday Morning

Bombardier Inc. just announced that it has reached an agreement in principle for the sale of its recreational products business for an aggregate purchase price of $1.225 billion (Canadian). This agreement was entered into by a corporation formed by Bain Capital, members of the Bombardier family, and the Caisse de depot et placement du Quebec.

The Board received favorable fairness opinions from its own financial advisor, UBS, and from Morgan Stanley, financial advisor to the independent committee. Directors of Bombardier who are members of the Bombardier family abstained from participating in Board meetings in which the transaction was considered and did not vote on the transaction.

ANN was in on the conference call,

...as Bombardier Inc. President and Chief Executive Officer Mr. Paul M. Tellier spoke in both French and English, as he announced the finalization of the deal to sell Bombardier Recreational Products.

"This sale of Bombardier Recreational Products represents the conclusion of the last of the major elements of the financial restructuring of Bombardier that we announced April 1st," he said. That allowed a new round of financing, of which he was quite proud: "We issued $1.2 billion," in debt, he reminded us, "that was oversubscribed." Bombardier also sold the business aircraft division, an airport, and other major assets.

"This will improve ...our cash situation, and this will improve out debt-to-equity ratio. This is a major point -- and I repeat, a major point -- of our restructuring," he said.

Ongoing business is good, considering...

"Overall, we are pleased with our second-quarter results. The trend lines are in the right direction; but of course there is still a lot of hard work to do... Revenues are stable, in spite of a continuing challenging economic environment." He expanded on that: "The backlog has gone up, from $44 to $48 billion dollars (Canadian)." 66 commercial aircraft, opposed to 53 last year -- the best ever."

He added that, "Earnings before taxes for the first half of the year were 4.5%, comparable to last year." Things don't look bad for the future, either: "As far as I know," he said, "we are the only manufacturer in the business that has not reduced our forecasts for this year."

The crux of the matter, he said was that Bombardier was, "Delivering on what we said we would do, winding down businesses we are exiting; assets under management 'way down from $11.1 last year to $6.8 billion (Canadian) this year. It's very simple," he continued, "we will do what we say we will do. The hard work -- to improve profitability -- is well on the way."

Regarding a question about Bombardier's oversubscription, Mr. Tellier replied, "To have too much cash is a very good problem to have. I do not think that we have too much cash."

A bigger 'liner?

Tellier said that, for the forseeable future at least, "We have no plans for a 100-seat or more aircraft. We are pleased with our fine line of aircraft, as it is." Part of that is due to how hard it is for airlines and other customers to get credit. Financing opportunities (companies that finance airliners) have gone "...from 50 or so, to a handful." Bombardier is getting some financing from the Canadian government, but Tellier emphasized that, "This is market-rate financing; it is not any kind of subsidy."

Future of Recreational Products

"We did not sell the Recreational Products Division because we did not have confidence. It was to increase cash flow, increase equity. We have great confidence in its future."

Tellier was high on Rec Products' lines: personal watercraft ("in which we hold a market leadership position"), Evinrude, OMC... but he said not a word about Rotax, or the new V-6 aircraft engine.

Why sell Recreational Products, as opposed to some other division? It had to do with Bombardier's vision of its core businesses, Mr. Tellier explained. "There was very little 'carving-out' required... therefore it was relatively easy to sell this [unit]... as opposed to [selling] something else."

FMI: www.bombardier.com; www.vaircraftengines.com