Bombardier selling military training unit to CAE, including NATO pilot school

MONTREAL – Bombardier Inc. (TSX:BBD.B) is preparing to sell its Military Aviation Training unit for C$19.8 million to CAE Inc. (TSX:CAE), a Montreal-based company that specializes in training equipment and services.

Among other things, CAE will take over as prime contractor for the NATO Flying Training in Canada, or NFTC, a program that Bombardier has been operating out of Canadian Forces Base Moose Jaw in Saskatchewan and CFB Cold Lake in Alberta.

Bombardier currently has 200 employees supporting the NATO training program, which was begun in 2000.

CAE, which plans to retain all 200 of those employees, says the deal will enhance its core capabilities and provides an opportunity for growth.

The company is a global supplier of full flight simulators to train pilots for commercial and military aircraft. It also operates a network of civil aviation schools and provides military training services under contract to customers around the world.

Bombardier and CAE say their deal requires various approvals but they expect it to close this year.

The proposed transaction comes as Bombardier, the country’s leading aerospace company, adjusts to weak demand for some of its products and the cost of two major aircraft programs — the CSeries passenger jet for commercial airlines and the Global 7000/8000 business jets.

RBC Capital Markets analyst Walter Spracklin says the deal shows the extent that Bombardier’s management is trying to cash in on non-core assets.

“We believe there could be additional asset sales as management looks to improve liquidity levels, in particular assets that are not currently generating cash flow, but may have patent/future market value,” Spracklin wrote in a commentary.

Bombardier’s shares have traded around six-year lows since announcing Jan. 15 that it would suspend work on a third program, the Learjet 85 business jet, while also reducing its prior estimate of cash flow from the aerospace division in 2015 to US$800 million from between US$1.2 billion and US$1.6 billion.