- The French giant confirms the “discussions are ongoing” for the takeover
- According to media reports, the deal could be closed and announced as early as today
- Stock surges above $50, has gained nearly 40% since October
Shares of the French high-speed rail maker Alstom jumped more than 4% today on the news that the company has a “preliminary agreement” to buy the train business of the Canadian company Bombardier. The stock price now trades above the $50 mark for the first time in its history.
Fundamental analysis: Deal could be announced today
Early this morning, major media outlets have reported that Alstom is in talks to buy Bombardier’s train unit in a deal worth around $7 billion on an enterprise value basis. The French giant confirmed the reports, however, it insists that “talks are ongoing”.
“Alstom confirms being in discussions with Bombardier regarding a possible acquisition of Bombardier Transportation by Alstom. Discussions are ongoing. No final decision has been made,” Alstom said in a statement.
However, Reuters and Financial Times report that the deal is close to being agreed upon and it may be announced as soon as today. The next step is to receive approval from EU competition regulators.
Last week, Bombardier sold its A220 stake to Airbus and the Quebec government for $591 million. The Canadian company used to own a 33.58% stake in the joint partnership.
On the other hand, the takeover of Bombardier’s train unit will help Alstom to compete with some of the world’s biggest companies in this industry, including CRRC Corp.
“Overall, both Bombardier Transportation and Alstom generate about 60-65 per cent of their revenues from Europe. However, there are potentially limited overlaps . . . between them in the rolling-stock and signalling markets, which was the main point of contention related to the blocked proposed merger of Alstom and Siemens Mobility,” said analysts at UBS.
This marks Alstom’s second attempt to take on the industry’s biggest players after the European Union blocked the French company from merging with Germany’s Siemens.
Technical analysis: New all-time high
A fresh record high was printed today for Alstom at $50.64, which marks the first time the company’s stock price travelled above the $50 handle. As seen in the weekly chart above, shares of the company have been travelling almost vertically for the past few months.
As the stock trades in uncharted territory, there are not many resistance levels and targets we can identify. One to look for is the zone around $53 where the 261.8% extension sits. If investors continue to buy Alstom stock, we may see a trip to this level in the coming days.
For those who are looking to hop up on the bullish train at a better price, a potential pullback towards $44 offers a solid opportunity.
In total, shares of Alstom have gained more than 38% since October last year.
Alstom confirms it is in talks to buy Bombardier’s train unit, in a deal worth around $7 billion. Major media outlets suggest that the deal may be closed and announced today as the French train giant finally gets its wish to take on bigger industry players.