(Bloomberg) -- Bombardier Inc. is selling its regional-jet business to Mitsubishi Heavy Industries Ltd., ending the Canadian company’s foray into commercial aircraft after more than three decades.
Mitsubishi agreed to pay $550 million for the maintenance, support, marketing and sales operations of the aging CRJ program, the companies said Tuesday. The Tokyo-based manufacturer, which is developing the first Japanese-built airliner since the 1960s, will also assume liabilities of about $200 million.
The deal caps a multiyear overhaul for Bombardier, which until recently had ambitions to challenge Boeing Co. and Airbus SE with an all-new single-aisle jetliner. As the so-called C Series plane suffered from delays and cost overruns, Chief Executive Officer Alain Bellemare unloaded that program and a turboprop line after taking the helm in 2015 and refocused Bombardier on business jets and passenger trains.
“It was very clear when I came in 2015 that commercial was kind of a drag on Bombardier,” Bellemare said in an interview. “We had a very strong business-aircraft franchise, and now that we’ve addressed all the pieces of the commercial side, it’s a good moment.”
Bombardier rose 3.2% to C$2.26 at 1:35 p.m. in Toronto, the second-biggest gain on Canada’s benchmark S&P/TSX index. The announcement was made after the market close in Japan.
With the transaction, Mitsubishi gains an experienced engineering corps and a global-sales and support organization to help market its nascent jet lineup as the unprofitable CRJ winds down over the next year and a half. Mitsubishi is rolling out a roomier regional-aircraft line dubbed the SpaceJet, and it highlighted a new, lighter 76-seat model at last week’s Paris Air Show.
Mitsubishi has spent at least $2 billion developing its initial plane, originally known as the MRJ, which has battled delays and slow sales due to its heavy weight that violated restrictions in U.S. pilot union contracts. The company, which sees global demand for more than 5,000 regional jets over the next two decades, is seeking to snare sales away from Embraer SA, particularly for U.S airlines.
Boeing has close ties to both planemakers. Mitsubishi, a longtime industrial partner, has hired several former executives of the U.S. manufacturer and opened a flight-testing center near a Boeing operation in Moses Lake, Washington.
The U.S. aerospace giant is taking over Embraer’s commercial-jet division, including a plane with its own weight issues. Embraer’s upgraded E2 line has an aircraft with as many as 146 seats.
The Mitsubishi deal follows a move last year by Bombardier to hand control of its C Series jetliner program to Airbus, which renamed the plane the A220. Bombardier this year completed the sale of its Q400 turboprop program to De Havilland Aircraft of Canada Ltd.
“It feels good to get this done four years into the turnaround journey,” Bellemare said.
The Mitsubishi deal gives Bombardier “a fair price for a program that was winding down,” said Cam Doerksen, an analyst with National Bank Financial. “It was a good outcome for Bombardier.”
After the deal closes, Montreal-based Bombardier will assemble CRJ planes at a factory in Mirabel, Quebec, working off the order backlog on behalf of Mitsubishi. Bombardier will also supply spare parts for the plane, which is expected to end production in the second half of next year, the companies said.
Bombardier has 1,600 employees at the factory, said spokesman Olivier Marcil. Of those, three quarters will join Mitsubishi while the rest remain to carry out the current CRJ production run. “We don’t expect to cut any factory jobs in the short term,” Marcil said.
Mitsubishi will assume Bombardier’s interest in a regional-jet securitization program, which is valued at about $180 million. Bombardier will retain liabilities representing part of credit and residual-value guarantees totaling approximately $400 million.
--With assistance from Julie Johnsson.
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