Mon, Feb 08, 2016 page6

• Trudeau said to tie Bombardier aid to shares changes

  • Bloomberg
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  The Canadian government is pushing for changes in the dual-class share structure of embattled aircraft manufacturer Bombardier Inc in exchange for possible financial aid, officials familiar with the plans said.

  Canadian Prime Minister Justin Trudeau’s government, which is reviewing a request by Bombardier to help fund the development of its C Series jet, is concerned about the company’s corporate governance rules through which the Bombardier family controls the business, three people familiar with the file said.

  If the Canadian government imposes a governance condition, it may force Bombardier into a tough choice: loosen family control of the business or give up federal funding. The 73-year-old Bombardier has been reduced to a penny stock as investors lose confidence in a company that’s two years behind schedule and about US$2 billion over budget in the development of its C Series jet.

  The Trudeau government, meanwhile, faces its own risk that changes in governance could leave Bombardier vulnerable to a takeover.

  Canadian Economic Development Minister Navdeep Bains, asked on Feb. 2 whether he was pressing for changes to the share structure, would say only the government continues to review its options.

  “We just want to do a thorough job of looking at the business case,” said Bains, Trudeau’s point-man on the Bombardier file.

  Members of the Bombardier family of Quebec control the manufacturer through its dual-class share structure by holding more than 50 percent of the voting rights in the company, despite only owning a minority equity stake.

  The company has been tinkering with its governance. Pension fund manager Caisse de Depot et Placement du Quebec, in exchange for its US$1.5 billion investment in Bombardier’s rail division last year, won some concessions including a say in the appointment of independent directors.

  Asked about whether the government may seek changes to the dual-class share structure, Brian Tobin, a former Liberal industry minister who is now a Bank of Montreal investment banker, said he “can’t imagine” that corporate governance is not a factor in the government reviewing the business case.

  “I am certainly sympathetic that a government or governments should look very hard at this before they just turn their backs and walk away,” he said.

  Trudeau has avoided taking a direct position on Bombardier. The Liberals hold 40 of Quebec’s 78 electoral districts and face political pressure to avert collapse of an iconic company that has lost 44 percent of its share value since Trudeau took power.

  Quebec’s provincial government has already stepped in with funding, and Montreal Mayor Denis Coderre is among those calling for a quick decision.

  “Bombardier’s important for Canada,” Coderre said in a Feb. 5 interview. “Bombardier, there’s thousands and thousands of jobs all over the country and we have to help them — with due diligence, of course.”

  Canada should “immediately” provide funds to Bombardier while the company waits for the US Federal Aviation Administration to certify the C Series jets, according to Luc Theriault, parliamentary leader of the separatist Bloc Quebecois in the House of Commons.

  Some onlookers expect Trudeau will have no choice but to offer some aid to the Quebec plane maker.

  “From a political point of view, it’s a no-brainer,” Fred Lazar, an associate economics professor who studies aerospace at York University in Toronto, said in a Feb. 1 interview. Discussions are therefore just a matter of what the Trudeau government can get from Bombardier in return, he said.
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