Under the terms of the agreement, CDPQ will acquire shares in Bombardier Transportation's newly-created holding company Bombardier Transportation (Investment) UK, convertible into a 30% common equity stake subject to annual adjustments related to performance.
In a statement, CDPQ says Bombardier's directors evaluated a wide range of strategic options for its rail business including an initial public offering and a competitive international auction for the private placement of a minority stake before selecting the sale to CDPQ as its preferred option.
The deal is expected to increase strengthen Bombardier's financial position with no increase in debt.
For each of the first five years following the closing date, CDPQ's ownership on conversion and return may be subject to upward or downward annual adjustments, based on a performance target jointly agreed as part of Bombardier Transportation's business plan.
If Bombardier Transportation outperforms its business plan, CDPQ's percentage of ownership on conversion of its shares decreases by 2.5% annually, down to a minimum threshold of 25%. In this circumstance, the convertible shares' minimum return also decreases from 9.5% to a floor of 7.5%.
Should Bombardier Transportation underperform relative to its plan, CDPQ's percentage of ownership on conversion of its shares will increase by 2.5% annually, up to a maximum of 42.5% over a five-year period. In this case, the convertible shares' minimum return also increases by 2.5% up to 12%.
Bombardier and CDPQ have also agreed to a cash reserve threshold of at least $C 1.25bn to ensure the financial stability of the group is maintained.
"it's good news for customers if you get a strong investor," says Bombardier Transportation president Dr Lutz Bertling. "This demonstratesconfidence in the company and confidence that the company will continue to grow."