UK-based rail company Bombardier and Caisse de dépôt et placement du Québec (CDPQ) have signed a memorandum of understanding (MoU) to sell the former’s rail business to Alstom in France.

The move comes as Bombardier plans to focus exclusively on business aviation. It also aims to deleverage through the sale of its business Bombardier Transportation.

Bombardier and Canadian pension fund management company CDPQ will sell their interests in Bombardier Transportation to Alstom. They value the enterprise at $8.2bn.

CDPQ owns a 30% stake in Bombardier Transportation.

Following the deduction of debt-like items and transferred liabilities, Bombardier expects total proceeds to be around $6.4bn. It will allow for to up to $440m in upward adjustments.

Bombardier will receive net proceeds ranging between $4.2bn and $4.5bn. This comes after deducting CDPQ’s equity position of between $2.1bn and $2.3bn, which it will use to reduce debts.

Bombardier president and CEO Alain Bellemare said: “Selling the rail business will allow us to reshape and redefine our capital structure. Adding a substantial amount of cash to the balance sheet, and removing la Caisse preferred equity in transportation, will change the game for Bombardier.

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“Including expected proceeds from previously announced transactions, Bombardier would have between $6.5bn and $7bn of pro forma cash on hand, putting the company on a brand-new footing to address its $9.3bn of debt.”

CDPQ will become a new long-term shareholder of Alstom, holding approximately 18% of capital.

Bombardier Transportation reported €7.4bn in sales as of December. It offers a broad product portfolio across all market segments.

The acquisition will provide new rolling stock for Alstom’s portfolio. This will allow Alstom to establish a comprehensive product offering across all rail sectors.

It will also give Alstom access to the largest installed train fleet globally, as well as a maintenance facilities network.

Alstom will benefit from new technologies and improved research and development (R&D) resources. The company will use these to investigate smart and green mobility improvements.

Additionally, it intends to establish a centre of excellence for design and engineering, as well as high-tech R&D activities.

The parties involved expect the deal to close in the first half of next year.