Mitsubishi Heavy Industries to acquire Bombardier’s CRJ program for $550m

posted on 26th June 2019 by Justin Burns

Mitsubishi Heavy Industries (MHI) has signed a deal to acquire Bombardier’s regional CRJ jet program for US$550 million and the assumption by MHI of liabilities of about $200 million.

Under the agreement, Bombardier’s net beneficial interest in the Regional Aircraft Securitization Program (RASPRO), valued at approximately $180 million, will be transferred to MHI.

MHI – parent to Mitsubishi Aircraft, which manufactures the SpaceJet regional airliner family – will acquire the maintenance, support, refurbishment, marketing, and sales activities for the CRJ Series aircraft.

This includes the related services and support network located in Montréal, Québec, and Toronto, Ontario, and its service centres located in Bridgeport, West Virginia, and Tucson, Arizona, as well as the type certificates.

This acquisition is said to be complementary to MHI’s existing commercial aircraft business, in particular the development, production, sales and support of the Mitsubishi SpaceJet commercial aircraft family.

The maintenance and engineering capabilities of the CRJ program will further enhance critical customer support functions, a strategic business area for MHI in the pursuit of future growth.

MHI president and chief executive officer, Seiji Izumisawa said: “As we outlined during the recent Paris Air Show, we are working hard to ensure that we provide new profit potential for airlines and set a new standard for passenger experience.

“This transaction represents one of the most important steps in our strategic journey to build a strong, global aviation capability. It augments these efforts by securing a world-class and complementary set of aviation-related functions including maintenance, repair and overhaul (MRO), engineering and customer support.”     

Izumisawa added: “The CRJ program has been supported by tremendously talented individuals. In combination with our existing infrastructure and resources in Japan, Canada and elsewhere, we are confident that this represents one effective strategy that will contribute to the future success of the Mitsubishi SpaceJet family.

“MHI has a decades-long history in Canada, and I hope this transaction will result in the expansion of our presence in the country, and will represent a significant step in our growth strategy.”

Bombardier president and chief executive officer, Alain Bellemare said: “We are very pleased to announce this agreement, which represents the completion of Bombardier’s aerospace transformation.

“We are confident that MHI’s acquisition of the program is the best solution for airline customers, employees and shareholders. We are committed to ensuring a smooth and orderly transition.”

He added: “With our aerospace transformation now behind us, we have a clear path forward and a powerful vision for the future. Our focus is on two strong growth pillars: Bombardier Transportation, our global rail business, and Bombardier Aviation, a world-class business jet franchise with market-defining products and an unmatched customer experience.”

The CRJ production facility in Mirabel, Québec will remain with Bombardier. Bombardier will continue to supply components and spare parts and will assemble the current CRJ backlog on behalf of MHI. CRJ production is expected to conclude in the second half of 2020, following the delivery of the current backlog of aircraft.

Bombardier will also retain certain liabilities representing a portion of the credit and residual value guarantees totaling $400 million. This amount is fixed and not subject to future changes in aircraft value, and payable by Bombardier over the next four years.

The transaction is currently expected to close during the first half of 2020 and remains subject to regulatory approvals and customary closing conditions.

The agreement contemplates a reverse break fee payable by MHI under certain circumstances.