Bombardier Inc. has further increased its cash holdings by signing a deal to sell its Downsview property in Toronto for $816 million to the Public Sector Pension Investment Board.
Under a lease agreement, the company will continue to operate from Downsview for up to three years following the closing of the deal, with two optional one-year extension periods.
Bombardier also signed an agreement with the Greater Toronto Airports Authority for a long-term lease of a property at Toronto Pearson International Airport where it plans a new final assembly plant for up to 100 Global business jets a year.
“The Downsview property is an amazing piece of land in the core of Toronto but it is underutilized by Bombardier,” president and CEO Alain Bellemare said Thursday in a conference call ahead of the company’s annual general meeting.
The $816 million (US$635 million) sale gives the company a positive cash impact of more than US$550 million, he said.
He said Bombardier only uses about 10 per cent of the 148-hectare site but has to pay the entire cost of operating a runway.
Bellemare told analysts that the company has five years to consider where assembly of the Q400, currently done at Downsview, will take place. However, he said Bombardier is committed to the turboprop, saying there is good sales opportunities in emerging markets such as China and Africa.
The sale comes after the company has reviewed its facilities around the world as part of its turnaround plan in order to have the most efficient and cost-effective operations.
It is expected to be completed in the second quarter.
Together with its recent equity offering, the company will obtain about US$1 billion in cash to give it the ability to complete its five-year turnaround plan, accelerate its debt reduction and invest in its future programs, Bellemare told analysts.
Bombardier also said it has received nearly all regulatory approvals for the announced partnership with Airbus for the C Series aircraft program. Completion of the transaction is expected before the end of the second quarter, ahead of schedule.
The company delivered five C Series during the quarter, raising the number of planes in service to 31. It continues to expect delivering 40 planes this year.
Bombardier, which reports in U.S. dollars, also said it earned $44 million or a penny per share on $4.03 billion in revenue in the quarter ended March 31. That compared with a profit of US$6 million or zero cents per share on US$3.61 billion in revenue a year ago.
On an adjusted basis, Bombardier said it earned $35 million or a penny per share in the quarter compared with an adjusted profit of $38 million or a penny per share a year ago.
Bellemare said the quarter was strong for Bombardier.
“We continue to execute on our plan, delivered on our commitments and made the strategic moves necessary to unleash the full value of our portfolio. With these actions our found is solid and the path forward is clear.”
Bombardier also announced that it has signed a contract with American Airlines for 15 CRJ900 commercial aircraft, with options for 15 more planes.
The firm order is valued at about US$719 million based on list prices, although airlines typically receive large discounts.
Deliveries are expected to start in the second quarter of 2019.