Caisse putting $1.5B US into Bombardier for stake in rail business

Bombardierhas signed a deal that will see theCaisse de dpt et placement du Qubec (CDPQ) invest $1.5 billion USin a newlycreated company that will hold the company's rail transportation business.

The giant Quebec pension fund Canada's second-largest says the investment will help stabilize the company's current financial situation.

• Bombardier looking for federal help after Quebec's $1B bailout
• Bombardier's strange chokehold on the public purse
• Justin Trudeau's Bombardier decision not based on 'emotion or politics or symbols'

The Caissesays it's betting on Bombardier and in rail transportation.

The $1.5 billion represents a 30 per cent stake in a new holding company, BT Holdco.

The company is a subsidiary of Bombardier Transportation and will be based inGermany.

The investment comes less than a month after the provincial government announced a bailout of more than $1.3billionin the company's struggling CSeries jet program.Bombardier posted a loss of $4.9billion US inthe third quarter.

Rail industry has 'growth potential'

The Montreal-based companysays the deal concludes its review of financingoptions forBombardierTransportation, which sells subway cars and other mass transit systems.

"This investment by CDPQ, which has a long history as one of our major investors, is a testimonial to the growth potential of the rail industry and toBombardier's leadership in seizing the opportunities this market offers on a global scale,''Bombardierchief executive Alain Bellemare said in a statement.

Caissepresident MichaelSabiasaidtheinvestment is a safe bet.

"Bombardier Transportation is a global leader in the rail industry, with a robust backlog, predictable revenues, and meaningful potential for growth,"Sabiasaid in a statement.

Karl Moore, an associate professor at McGill University, said it's a solid business deal, with more upside than Quebec's investment in Bombardier's CSeries program.

"It's a different part of the business. As Michael Sabia points out, it's a global business.It's relatively resilient during tough economic times because it's about government spending on rail companies, long-term infrastructure projects," he said in an interview with CBC's The Exchange.

He said protecting Quebec industry is less a consideration than getting good return for the pension fund that the Caisse invests.

"They've structured it in a way that they will get very good returns in a safe manner," he said.