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Bombardier Buying Canadair

August 18, 1986

OTTAWA (AP) _ Canadair Ltd., a state-owned aircraft manufacturer that has lost millions of dollars over the past decade, was sold to Bombardier Inc., the government said Monday.

The deal, estimated to be worth at least $200 million (Canadian), is the latest move by Prime Minister Brian Mulroney’s conservative government to turn over to the private sector government-owned businesses.

In January the government sold de Havilland Aircraft of Canada Ltd. to Boeing Co. for $155 million (Canadian).

The Canadian dollar is currently worth about 72 cents U.S.

The Cabinet endorsed the sale last week but a formal announcement was delayed until Monday to allow more time to work out ″the complex nature of the transaction,″ according to Barbara McDougall, minister of state for privatization.

Under the terms of the agreement, Ottawa will receive $120 million in cash for its shares of Canadair.

The government also will retain ownership of techonology developed by the company for its Challenger executive jets and will license this technology for future annual royalties estimated by Montreal-based Bombardier at $173 million or the equivalent in some other form.

Some airport land owned by Canadair in Montreal will be sold to Bombardier for $11.5 million, with $5 million to be held in escrow for runway improvements.

In addition, Ottawa will retain a stake of at least $50 million in special shares to the company to ″encourage increased research and development, exports and Canadian content,″ McDougall said.

Canadair makes the Challenger corporate jet plus other specialized aircraft. Bombardier makes mass-transit equipment and snowmobiles.

Paul Marshall, president of Canada Development Investment Corp., the government’s holding company, said the deal is worth about $200 million initially but will increase to more than $300 million as the Challenger royalty agreement gains in value.

McDougall told a news conference that Bombardier’s financial discipline, management and marketing skills will create a much brighter future for Canadair, which has cost the Canadian taxpayer more than $1.4 billion in accumulated losses since it was purchased from General Dynamics Corp. of St. Louis in 1976.

″The purpose of privatization is not to repair the financial mistakes of the past,″ McDougall said. ″Canadians must realize that no sale could recoup the billions of dollars spend on Canadair in its recent history by the former Liberal government.″

In another development Monday, Bombardier Chairman Laurent Beaudoin said that once Canadair is acquired, Donald C. Lowe, a former president of Pratt & Whitney Aircraft Inc.’s commercial products division in the United States, would become president and chief executive officer.

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