Bombardier recreational unit placed up for sale

No buyers are named
Even though the Bombardier Recreational Products Division has been put up for sale, the Bombardier family could continue to own a major chunk of the company when the sale is completed later this year.
Following an announcement April 3 by Bombardier President and CEO Paul Tellier that Recreational Products would be sold as part of a bold divestiture to generate cash for the struggling international parent company, the Bombardier family said it is interested in “participating in a bid with other investors to acquire the Recreational Products group from Bombardier, Inc.”
A family spokesman told Powersports Business that it would be actively involved in acquiring Recreational Products.“Because of their (statement),” he said, “you can presume they are not going to sit back; they will take a proactive role in the purchase.”
In its statement April 3, the family said it believes it can “add value to a group’s offer because of its industry knowledge.”
The spokesman declined to comment further on any moves the family might make, saying “We’ll have to wait and see.”
In a related move, Bombardier family members purchased six million shares of the new Class B shares at $3.25 per share. With the sale of the 340 million new shares, the family’s control position in the company drops to 59.6% from 63%. The total number of shares now held by the family, the spokesman said, is 306 million shares.
Bombardier, the diversified Montreal-based international manufacturer, traces its roots to 1942 when founder Joseph-Armand Bombardier incorporated the company. Many family members serve in management positions, including board chairman and former president Laurent Beaudoin, Bombardier’s son-in-law.
A BROAD RESTRUCTURING
Tellier, a recognized corporate turn-around specialist, was brought on board several months ago to reorganize the struggling company that has been hit hard by the slump in the aerospace industry.
For the year ended Jan. 31, 2003, the company reported a net loss of $615.2 million, on sales of $23.7 billion. That compares with earnings of $36 million the previous year on sales of $21.8 million. The aerospace operation lost $32.4 million, before taxes and extraordinary items, compared to earnings of $721.5 million the previous year. (All numbers used in this report are Canadian dollars.)
In announcing last year’s financial results on April 3, Tellier also described to company followers a broad restructuring designed to quickly
generate cash and help the company focus on its two primary businesses: aerospace and transportation.
The twin keys to Tellier’s restructuring program are the equity offering designed to raise at least $800 million and the sale of several properties, including Recreational Products. The divesture move is expected to raise at least $150 billion, the company said. Also being sold is the Belfast City Airport in Northern Ireland and the military technical and training services the company provides through its aerospace division.
The equity offering and the sale of assets are expected to be completed within nine months, Tellier said.
A SUCCESSFUL BUSINESS
While many people were surprised that Recreational Products would be put on the block, no one doubts the value of the operation. For the year ended Jan. 31, 2003, Recreational Products earned $138.4 million before taxes on sales of $2.5 billion.
Why sell a successful business operation? Because its success makes it one of Bombardier’s most liquid assets — one of the things it can sell the quickest for a good price — say company officials.
“The reason why we’re putting this up for sale,” said a company spokesman, “is because it’s so successful. It’s performing well; we have good financials; our market position is good; our diversification in recreational motor vehicles is fairly broad, and our value in the market is fairly good.”
The entire Recreational Products business unit is being sold. Included are snowmobiles, ATVs, PWC and jet boats, outboard motors, and the company’s Rotax engine operation.
According to Bombardier, it holds a leading market share in many of the businesses in which it operates.
SELLING PROCESS BEGINS
In an interview with Powersports Business, Bombardier vice president Pierre Pichette said the selling process has begun but he could offer few details on the situation.
“Basically,” he said, “the sales process has started. We’re very much hopeful that it will last three or four months and come to an end.”
Pichette said Bombardier “is looking for a procedure that is optimum for shareholders and at the same time is fairly fast.” No specifics to the sale process have been set up he said. There’s no minimum price and there’s no method for evaluating offers at this time. No possible purchasers, other than the family, were identified by Pichette, although rumors abound including Honda, Harley-Davidson, John Deere and boating magnet Irwin Jacobs.
One restriction facing a possible purchaser: anti-trust considerations. Pichette said that it’s not likely that a purchaser would be permitted to hold more than 50% of any market in which it operates following the purchase.
Pichette could not provide an asset value for Recreational Products, the number at which Bombardier designates the value of the recreational products for accounting purposes. “It’s being worked on at this time,” he said.
While it’s possible that the Recreational Products business could be sold in pieces, Pichette said that’s not likely. “The diversified base we have here is very attractive,” he said. “That’s where a large part of the value comes from, and that’s how people should look at it.”
New York investment banker Morgan Stanley has been retained to assist with the sale and a special oversight committee has been set up to ensure that any dealings with the family are done at arms length.

Pichette said it’s “business as usual” at Bombardier Recreational Products for dealers and customers. “It’s exactly the same as it was on April 2 (before the announcement),” he said. “Dealers don’t have to make any changes, and our manufacturing schedule for our northern operations is unchanged.”