Alstom cuts offer for Bombardier's rail unit by $350 million in firmed-up deal

By Allison Lampert and Rachit Vats

(Reuters) - French train maker Alstom <ALSO.PA> said on Wednesday it has lowered its offer to acquire Bombardier Inc's <BBDb.TO> rail business by $350 million, but the two still expect to close the deal to create the world's second-largest rail company earlier than expected.

The two companies announced the revised terms of an agreement which gives Bombardier's rail unit an enterprise value of $8.4 billion, in a deal that would allow the cash-strapped Canadian firm to pay down some of its $9.3 billion in debt.

Bombardier's surprise quarterly loss last month, mostly due to a charge related to costs for several projects in the UK and Germany, prompted Alstom to revisit the terms of the offer that was initially launched in February.

Bombardier, which is shedding assets amid plans to become a pure-play business jet maker, said it now expects net proceeds of about $4 billion, after deducting the $2.2 billion equity position of shareholder Caisse de depot et placement du Quebec.

The companies now expect the deal to close during the first quarter of 2021, pending regulatory approvals and a vote by Alstom shareholders on Oct. 29. The deal was previously expected to close during the first half of 2021.

The expectation "is as good of an outcome as could have been expected," said CIBC analyst Kevin Chiang in a note to clients.

He said the reduction "was better than feared."

Bombardier shares were up 6% by afternoon, the most in nearly two months, while the yield on its 7.875% U.S. dollar bond that matures in April 2027 plunged nearly 2% to 13.55%, in a sign of investors' increased confidence.

In July, Alstom secured European Union antitrust approval to acquire Bombardier's rail business, in a deal worth up to 6.2 billion euros ($7.30 billion), aimed at making Alstom the world's second-largest rail maker after China's CRRC Corp <601766.SS>.

(Reporting by Allison Lampert in Montreal, Rachit Vats in Bengaluru, and Gwenaelle Barzic in Paris; Additional reporting by and Fergal Smith in Toronto; Editing by Shinjini Ganguli and Timothy Gardner)