Alstom SA to Acquire Bombardier Inc Analyst Call
Feb 17, 2020 PM UTC
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ALO.PA - Alstom SA
Alstom SA to Acquire Bombardier Inc Analyst Call
Feb 17, 2020 / 05:30PM GMT
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Corporate Participants
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* Henri Poupart-Lafarge
Alstom SA - Chairman & CEO
* Laurent Martinez
Alstom SA - CFO & Senior VP of Finance
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Conference Call Participants
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* Akash Gupta
JP Morgan Chase & Co, Research Division - Research Analyst
* Gael de-Bray
Deutsche Bank AG, Research Division - Head of European Capital Goods Research
* Guillermo Peigneux-Lojo
UBS Investment Bank, Research Division - Executive Director and Industrials Analyst
* Konark Gupta
Scotiabank Global Banking and Markets, Research Division - Analyst
* Martin Wilkie
Citigroup Inc, Research Division - Director
* William Mackie
Kepler Cheuvreux, Research Division - Head of Capital Goods Research
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Presentation
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Operator [1]
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Ladies and gentlemen, welcome to the Alstom analyst call.
I now hand over to Henri Poupart-Lafarge. Sir, please go ahead.
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Henri Poupart-Lafarge, Alstom SA - Chairman & CEO [2]
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Good morning. Good afternoon, everybody. Welcome to this conference call. Thank you for making yourselves available on a very short notice, I don't know when you were on call, but probably 0.5 hour while ago, something like that. I think we wanted to get you as fast as possible on the announcement which we made, again, 0.5 hour ago on the acquisition of Bombardier Transportation by Alstom, which aims at accelerating our strategic roadmap, accelerating Alstom in Motion, by taking advantage of the complementarities, both in terms of geographies and product and activities of Bombardier.
So I'll go through the presentation quite happily with Laurent. And then, of course, we'll open a Q&A session with Laurent. We have also Emmanuelle Petrovic with us, our general counsel, in case you have some more detailed questions.
So as a summary of the announcements, we'll go into the details of each of the sections. The idea is to accelerate our strategy. The #1 item to keep in mind is a general context. As you know, train, rail transportation is -- has a lot of tailwinds as we speak. The momentum in Europe is absolutely unprecedented. We have a ridership increase all over Europe. As soon as I talked to customers, they always request for more capacity. So we are in a situation whereby the world is increasing its need for rail transportation in general. This is extremely important. I don't think I would have done this transaction if it was not in this context.
This transaction is here to accelerate our growth, again, in a booming market. It will significantly create value. I would say, both in terms of complementarities, but also in terms of turnaround. We know that Bombardier Transportation margins are below standard levels. We know that they've experienced difficulties on some projects. And I think, Alstom, with its track record and -- has the means to turn it around and to achieve the recovery of Bombardier Transportation. Then, of course, you will have synergies, which are related to R&D, product development in this whole platform and so forth. But I would say that in addition to a classical deal, there is, I would say, an element of turnaround, which is important.
In terms of numbers, and Laurent will come back to that. But we estimate that there will be a double-digit EPS accretion from year 2, post-closing which would occur beginning of 2021.
In terms of transaction, for the price is, and we'll come back to that, is between EUR 5.8 billion to EUR 6.2 billion, and we'll finance it mostly by equity, either by paying directly in shares or by raising capital. The financing is fully committed. And due to this payment in shares, CDPQ, Caisse de depot et placement du Quebec, will become the first -- the long-term first anchor shareholders, first shareholders of Alstom.
So going back to some of the elements I've just described. So going back to the market. Frankly, as I said, unprecedented. A lot of actions in favor of rail transportations worldwide where are used to this market for urban, with a lot of actions instead of trains, metros, and against cars in cities, but it has now reached, if I may say, passenger traffic, main lines. And you know, to quote an example, the green deal in Europe is very much favoring rail transportation. Germany has announced a very large investment plan in several rail transportation as well. So everything is pushing in the same direction, and we see that now in hire-ship. We have growth, which is expected between 3%, 5%. But if you see the immediate growth, whether we talk in Germany, after the decrease of VAT, that there is a boom in passenger growth and the need for new rolling stock in Germany. Of course, it is very important in our transaction because Bombardier is, as you know, extremely well positioned in Germany.
Just a track record of Alstom, because just to tell you that this is a step, a significant step, a meaningful step in a long-term strategy. It's not a change in our strategy. We are not entering into a new market, new activities, which is, I think, it's important. All what it will add is complementary to our activities, but it's not a new activity. And we want to accelerate our growth and our profitability going forward. And to do that, I think Bombardier will bring, again, nice product, nice geographies and nice margin enhancement potential. We have defined, and I remind you, Alstom in Motion, which is growth, innovation and efficiency.
Clearly, these 3 pillars will be complemented by Bombardier. Growth, of course, immediately by bringing new customers, new geographies. Innovation, as we'll have a larger scale, a larger platform in order to develop our products, to launch more R&D and of course, efficiency. We need to turn around Bombardier, and then we will achieve, we'll have a larger footprint and also a larger scale in order to have a different type of relationship with suppliers and so forth. So important to see that it's not to change, it's an acceleration, a huge acceleration, but an acceleration.
So about Bombardier, you know probably as much I know. Bombardier, it has -- it's a leader or reference in high mobility. It has strong products, very large product portfolio, a lot of expertise, very large industrial footprint, large installed base, which is a good basis for services, a large backlog and a revenue this year of EUR 7.4 billion.
So in terms of commercial and in terms of complementary. Traditionally, as you know, and historically, Bombardier is more in Northern Europe. The roots of Bombardier are in Germany, with AG a long time ago. They bought, in the U.K., the ex-British Rail at the time of the privatization, they were very present in Scandinavia. Alstom is more present in Spain, in Italy, of course, in France. So we have a good complement in terms of Europe. Asia is the same. They are -- Bombardier is very present in China with very successful joint ventures, including in high-speed trains, but also in [Mei Foo]. Very present in Thailand as well, in Australia, where we are more focusing on India, and we're more present in India than they are. They have a small presence in India, but we are much more present. They are present in Malaysia. We are present in Singapore. It's really different type of geographies.
U.S. and Canada are, of course, they are more present than we are in U.S. and Canada, and we expect a lot of investment, both in Canada and in the U.S. in terms of high infrastructure. So it will be a significant a potential for us to have access globally to this U.S. market, which, as you know, requires very specific holding stocks. So it's not something that you can develop easily. And also the industrial footprint is extremely complex to build. The supply chain is very different. And all that requires a lot of expertise and competence.
And of course, in Middle East, Africa, they have older type of, I would say, a footprint in South Africa. They are very present in locomotives, where we are in passenger trains. They are quite present in Turkey, in particular, in Istanbul, where they are the traditional signaling player in Istanbul.
So all in all, even though you could believe, from a remote standpoint, that we are in a similar type of countries, the strong points and the weak points are quite different from 1 company to another.
In terms of rolling stock, and not surprisingly, these weak points and some points translate into different type of product portfolio. Specific products, which are in Bombardier and not in our portfolio. We have the electrical locomotive, for example, where we are in heavy duty, but they are in the classical middle power range, European locomotives, monorail, very specific product. People mover, where they are extremely strong in people mover. They have a very large market share, where, by the way, they are doing some operations and maintenance. And they have products which are suited for their specific market, whether we took regional trains in the U.K., where we don't. The Talent 3, which is in Germany, and Metro in San Francisco, which we don't have, and bi-level coaches in the U.S. and Canada, which, of course, is a very, very specific metro products.
So if you look platform by platform, they are more in metro in very specific products, we are more present in the standard metros whereas they have very specific products dedicated to very specific network for some of you in London, another representing London. We are not -- we were present very, very long time ago.
In tram and light rail, we have specific product as well for Germany, for example, as you know, the German market is very scattered, as far as tramway is concerned. So they have a number of tramways dedicated to different cities. We don't have -- we have no -- we have very little tram for Germany today.
People mover, I talked about it. As you know, trains are quite specific to different geographies. They have the Aventra, they have the Nordics as well and locomotives, as I said.
So in terms of services, extremely important point is an important point. They are extremely present in services, both in the U.K. and in the U.S. And in the U.S., they are even in the operation. So it opens up for us a huge potential. And I think we will be uniquely placed to benefit from the growth of service, the growth of predictive maintenance. So they have their own predictive maintenance tool, we have our own predictive maintenance tool, so we can leverage both of them in order to build a very -- I mean a world-class and a leading solution for our customers.
And finally, as I said, for certain operations. So they do the operations, not only in the airport, but also in certain dedicated network, and this will give us as well a license there, which could open some potential.
Signaling. Signaling is a question as well of scale. And you know that signaling activities are quite synergistic in terms of scale. So they are smaller than we are. But nevertheless, they bring, as I said, some very specific technologies for specific countries, I would say, Cologne and Germany and Scandinavia, is probably the most important one in Europe, where we are not, today, as we speak, we are not present in Germany, and of course, Germany is by far, the largest market in Europe in the coming years. We are talking about a market of roughly EUR 1 billion per year, which is absolutely enormous. So it will give access to various assets to this market. There are some products in the U.S. as well. But I would say, I would qualify the -- I would say, would bring Bombardier by a few very strategic elements, which will open up a few strategic geographies.
In terms of industrial footprint, so no surprise. They have also footprints, which is quite different from ours. They are in China very much. So little in India, but very much in China. They have a lot of activities in the U.S., where we're well factoried, we a have large factories in Mexico, and we are not present in Mexico. They are in Eastern Europe, so -- as we are in Poland, but they are also in Ceska Lipa in Czech Republic. They have a very large factory in U.K., which obviously will be essential to penetrate the British market going forward. So it also complements our footprint.
Finally, I mean, in terms of margin, as I said, they have experienced some difficulties on their projects. So we have to work to bring them back to standard margin. I think we will benefit from a strong cultural fit. We, being in a position to rapidly dedicate and focus some of our efforts to turn them around. As you know, and this was probably -- I should have started by that, with the picture on our first slide, we are actually delivering a number of projects with them. So we know very well how they act and deliver their projects, and we are here, we'll be there to help them. I have to say also that a number of transportation employees are extremely talented within Bombardier. So the question is really to help them to turn their whole company around, but they have a lot of talent and expertise. It's just a question of making and implementing the right processes, the right control mechanisms.
In terms of synergies, I would say classically, mostly procurement, product platforms, R&D, small industrial synergies, but very limited, as I said, it's not an acquisition which aims at reducing the footprint. And again, the synergies will come between 4 to 5 years. First and foremost, because we are not in a hurry to implement all the synergies. Again, the most important part is to better deliver the projects to enhance the margin per se and progressively to, I would say, to reap the synergies and the profit coming from the synergies, but we are not going to implement them forcefully. What is extremely important on the first time is really to turn the project execution around.
So as I would say, as a conclusion, I would say, on my side, this will be a strong value-creating transaction. I think it's a unique moment in the rail industry where we benefit from their less headwinds, these tailwinds, or these tailwinds on our market. I think it's really a unique opportunity. Bombardier, as you know, Bombardier Group has its own strategy. So this, Bombardier Transportation was for sale. I can assure you that in -- if not for the global difficulties of Bombardier Group, this company would not have been for sale. So I think it was a unique opportunity for us. We thought thoroughly about this opportunity, and we think it can be a historical leapfrog for us in order to achieve another dimension. So we will recover, we'll work to recover Bombardier Transportation's EBIT. We'll work in order to achieve all the run rate cost synergies, and this should bring us lots of values.
In terms of numbers, we are targeting to be a double-digit EPS accretion for year 2. It's just a symbol to tell you that we are extremely confident in the value creation of this deal.
Now I will hand over to Laurent, who'll give you a little bit more flesh around the transaction itself.
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Laurent Martinez, Alstom SA - CFO & Senior VP of Finance [3]
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So a good evening to all of you. So starting with the transaction considerations. The price of the acquisition will be in between a floor of EUR 5.8 billion and a cap of EUR 6.2 billion. All of this, subject to the Bombardier Transport account and mechanism at closing. In addition, we will retain the net cash position at closing and we have a specific protection mechanism, which is granting a minimum 0 net cash balance as of end of December 2020. So just to illustrate this mechanism, and again, EUR 5.2 billion to EUR 6.2 billion are the magic numbers. If we would have closed end of December '19, we would have paid EUR 5.8 billion of proceeds to Bombardier Inc., But including in our hands, EUR 400 million of net cash, which would be retained by us, and all of this is assuming pension liabilities of EUR 900 million.
In terms of multiples, the transaction reflects, on a stand-alone basis, EV to EBIT before synergies between 11 and 12. After synergies, we are between 6.5 to 7 on the basis of, I would say, steady stage margin. This is, as you see, attractive economics. And if we compare with the sectors, which is between 12 and 13, and our, as well, multiple, which is in the range of 14 as we speak.
Moving to the financing. We have a financing which is fully committed. Our primary objective is definitely to keep a very strong balance sheet. And of course, to retain our visible A2 rating, and we have been designing this, our financing package as such. So as you see, EUR 5 billion out of the EUR 5.8 billion, EUR 6.2 billion will be financed with equity covenant. EUR 0.5 billion provided by -- to Bombardier Inc., EUR 2.6 billion to EUR 2.8 billion to CDPQ and EUR 2 billion, which will be raised to the market. So reminders, that will be a new debt and cash for EUR 0.7 billion to EUR 0.9 billion. So this package is fully secured at signing of the MOU, with a committed reach facility for EUR 2.4 billion for the equity to be right on the market and for the new debt. And we are, as well, have an agreement for a new FCF of EUR 1.5 billion, and showing sound liquidity moving forward.
So we'll -- again, with this financing package, we retain a very strong balance sheet, which is a top priority for us, but as well, flexibilities to pursue bolt-on M&A as part of our Alstom in Motion strategy.
Moving to the transaction structure. The transaction structures will take the form of an acquisition of 100% of Bombardier Transport share capital and voting rights, which are, as we speak, by Bombardier and CDPQ. As we just said, EUR 3.1 billion will come from CDPQ and Bombardier, investing in new Alstom shares, which will take the form of the reserve capital increase, which will be completed at closing. As a result, as you see on the right-hand side, CDPQ will become the Alstom first shareholders, with 18% of share capital, with 2 Board members and 1 nonvoting Board member, together with a 21-month lockup commitments from closing.
So as you know, CDPQ is a -- has a strong record as the cornerstone investors in mobility and infrastructures at large, and will be definitely an asset for the further development of Alstom. Bouygues, fully supportive of the transaction and will retain 10% of the share capital after closing.
So let's move to the indicative timetable. So today is D-day with the signing of the MOU. As you know, as part of the usual process, we'll be initiating work on sale consultation procedures before the signings of the shares of the SPA, the sales purchase agreement, which is expected to be signed in the second half of 2020. EGM will approve the recent capital increase by end October 2020, which, on the right issues, will look for, of course, EGM approval and will be subject, of course, to market conditions.
Finally, this transaction is, as always, I would say, subject to the clearance of the relevant regulatory authorities, including, of course, the antitrust authorities. And we are expecting, we are confident to close this transaction in the first half of 2021.
Give the mic back to Henri for the conclusion.
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Henri Poupart-Lafarge, Alstom SA - Chairman & CEO [4]
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Thank you, Laurent. So again, as a conclusion, I think this was -- and this is a unique opportunity to accelerate some strategic hallmark in a manner that we could not dreamed of. I think we are combining this very value-creating acquisition with a growing market. So we are investing, I believe, at exactly the right moment in the mobility world. We are acquiring a commercial presence, product, industrial assets. We are, of course, we leverage a large portfolio and we'll enhance our R&D capabilities. And as you know, mobility, sustainable mobility requires today, increasingly, some R&D and innovations. We will create value not only by having some synergies, but also by restoring Bombardier Transport's full potential, full margin potential. And so I think it's a win-win-win situation. It will be a win for our customers, which will benefit from better innovation, better product and having talked to a number of customers, they are all welcoming this deal, which will enhance our capabilities and enhance Bombardier Transport capabilities. This will be a value creator for our shareholders and for all the employees, it will give, of course, immense potential and immense opportunities.
So thank you for this call. Now we are ready to take your questions, Emmanuel, Laurent and myself. Thanks a lot.
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Questions and Answers
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Operator [1]
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(Operator Instructions) We will now take our first question from Martin Wilkie of Citi.
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Martin Wilkie, Citigroup Inc, Research Division - Director [2]
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This is Martin from Citi. You mentioned in the presentation, just a bit about the antitrust dependency. Just from the experience of the seamless proposed transaction a few months ago. Just what sort of pre or what you've done beforehand, just so you could walk through some of the risks or were perhaps less risk with this transaction?
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Henri Poupart-Lafarge, Alstom SA - Chairman & CEO [3]
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Thank you. Of course, as you can imagine, knowing what has happened. It was a key question for us, and we already talked informally with the commission. The file is very different from the one with Siemens. By far, the most difficult point with Siemens was signaling. It was very difficult because it was -- basically the commission said that there were 2 -- 3 main players, TELUS, Siemens and Alstom. And the commission, you don't want these 3 players to merge between each other. Here, Bombardier is a relatively small player in Europe in signaling. So it's a completely a different issue, and we don't expect any issue in that respect.
In terms of rolling stock, here as well. First, the commission was much more open at the time on rolling stock. There was an issue, very active, but as well, Bombardier is a much smaller player in various planes in Europe. Actually, it only serves in the very active market through its consortium with Hitachi. Hitachi, leading the consortium as we speak, and so it's a small activity. So it's -- it will be uniquely, it will be much, much simpler project than the one we had with Siemens. So we are much more confident that -- and we have, of course, taken the rest from the Siemens story.
I would say that we would like also to discuss extremely happily with the commission. We benefit -- I'll remind you, last time when we discussed about Siemens, there was a great level of uncertainty because it was -- and I think I told you that at the time, it was 20 years since the commission has not looked at any file in transportation. Here, we are in a different situation. The commission is extremely knowledgeable about the rail transportation market, so we can have a very, very rapid discussion with the commission and come to an agreement extremely much faster.
Finally, if I may say, it's also an acquisition for Alstom. So it will be from a governance standpoint, much easier where we'll discuss Alstom and the commission. It will not be a tripartite discussion, which was more complex at the time.
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Operator [4]
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(Operator Instructions) We'll now take our next question from William Mackie of Kepler Cheuvreux.
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William Mackie, Kepler Cheuvreux, Research Division - Head of Capital Goods Research [5]
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Congratulations. And my 1 question would be relating to the visibility that you have had during your initial due diligence phases on the backlog and the accounts for Bombardier. And specifically, what do you see in terms of the quality of the future gross margins and profits within the order backlog in the group? And whether you think that the 5 troubled contracts, which they have had to manage in the last 18 to 24 months are really just the remaining problem and that as they have suggested in the public, that looking forward the profit improvement profile for the group in BT is all about working through those contracts and the rest of the business looking in pretty good shape.
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Henri Poupart-Lafarge, Alstom SA - Chairman & CEO [6]
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Thank you. I mean, it's difficult for me to go into the details, of course, of Bombardier backlog. We had access to Bombardier backlog. We made some due diligences. Some of the projects we know very well for being part of it, some of the projects, we were not so familiar with. If I had just to simplify, we have -- as you know, we have the holding stock and the rights. So the rights is going perfectly well. So it's 50% of the business. On rolling stock, as you said, you have 5 projects. I would say, it's even, it's a little bit more than 5 projects per se, that we have really looked at. It's -- I mean, we have looked at their entire portfolio, but we made some thorough review, between 10 and 15 projects very thoroughly. It's -- most of these projects are at the turning point. So these projects have started to be delivered. So yes, it will take time. It will take time because it's a large backlog. So I don't count on any margin uplift of these projects. Particularly, I think this project now, we need to -- they need first because actually, working on in 1 year, to stabilize them and to deliver with the current margin in the backlog. We have valued the risk, which are still embedded in this backlog, which, as I said, goes a little beyond the 5 projects. We are -- we made a cautious analysis. So when we said that we want to turn around Bombardier, it's because of the new orders and the new ways of working and so forth. But we are not counting on particularly, uplifting the margin of the existing orders. So that's why I'll just say that it will take time. Don't expect an immediate margin uplift. The turnaround of Bombardier, as it was for Alstom, the good comparison is for Alstom, we have gradually improved the margin over the last 5, 6, 7 years even, this will be the same for Bombardier. We'll gradually improved the margin of Bombardier. Of course, I'm not talking about this year's margin, because this year has been impacted by some very specific events. But as compared to, I would say, a relatively low margin, which was 1 of Alstom at the beginning and then we progressively go back to the 7%, 8%.
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Operator [7]
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We will take our next question from Akash Gupta of JP Morgan.
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Akash Gupta, JP Morgan Chase & Co, Research Division - Research Analyst [8]
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Yes, Henri, I have a question about targeted capital structure. So you are targeting that cash position after close of that transaction. And maybe if you can elaborate why you are not considering to level EBIT up, given recently, you raised EUR 750 million at less than 1% interest. So -- and then also a follow-up, is there any breakup fee involved that we should be aware of?
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Henri Poupart-Lafarge, Alstom SA - Chairman & CEO [9]
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So I think that's not quite -- the first one, I would say, in terms of balance sheet, and then I will leave it to Laurent because it's -- the balance sheet, as you know, it's one of my home points. I always said that we want a very strong balance sheet. We are in a large project, large project business. We need to make sure that we are financed by our customers. So we need to make sure that we give the necessary sustainability to our balance sheet. So Laurent has structured the deal in a way that our, I would say, credit rating remains investment-grade at the same note, actually, strong investment grade. And this was the purpose. Even if we have very low interest rates, I think that it's -- we are not going to take that advantage, if I may say, I really want to keep this strong. So maybe Laurent, you'd say more on the structure and other position.
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Laurent Martinez, Alstom SA - CFO & Senior VP of Finance [10]
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Yes. So you say it's all working at -- so to -- the strategy of the financing is very much to maximize the equity portion, there is a number of merit into it: #1 is a strong balance sheet and keep the visible A2 ratio; #2 as well is benefiting from the very strong market momentum we had in our evolution, which is, of course, translated into our share price. So that was the basics, and this is why we have prioritized equity versus bonds despite the fact that, indeed, the money is quite cheap nowadays.
So to the breakup fees, there was a question on breakup fees?
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Henri Poupart-Lafarge, Alstom SA - Chairman & CEO [11]
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Yes. I think we have a classical breakup fees. What we have mentioned, breakup fees. At the end, if we cannot achieve the antitrust approval, for example, at the beginning, you know that in the French regulation, we cannot sign actually the SPA now. We need to first to consult with the union representative, the working concern representative, extremely important. And we, of course, this is the law and also, it's the way to do business. So at the end of this process, before signing the SPA, so what we are signing is an MOU, as you can see in the documentation. Before signing the SPA, we have a breakup fee of EUR 75 million, in case we are not signing the SPA. So this would be in 6 months now after having consulted the representative, what is it, EUR 75 million.
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Operator [12]
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We will take our next question from Konark Gupta of Scotia Bank.
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Konark Gupta, Scotiabank Global Banking and Markets, Research Division - Analyst [13]
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Just wanted to understand, you talked about some markets where Bombardier is present, and you don't have as much exposure and then, the opposite. I just wanted to understand which markets would you need to work more on in terms of getting regulatory approvals and getting union or labor approvals? I mean, which markets you overlap a lot more than the other markets, and which markets are the ones where you need to work with those guys?
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Henri Poupart-Lafarge, Alstom SA - Chairman & CEO [14]
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I mean, by far, it's Europe where we need to work the most. For the rest of the market, we don't expect a huge issue. We need to file in a very large number of markets, classically, but I don't -- I would not pinpoint beyond Europe, any specific places.
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Operator [15]
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We will take our next question from Gael de-Bray of Deutsche Bank.
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Gael de-Bray, Deutsche Bank AG, Research Division - Head of European Capital Goods Research [16]
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The first one is obviously a follow-up on the on the question you just had. And why do you think there will not be any antitrust issues for metros and regional trains in Europe? That's question #1. And question #2 is about the price you're going to pay, so between EUR 5.8 billion and EUR 6.2 billion. So on top of that, what shall we expect in terms of pension liabilities and in terms of any other kind of retained liabilities, as well as in terms of the transaction costs for the transaction?
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Henri Poupart-Lafarge, Alstom SA - Chairman & CEO [17]
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Give us, Laurent, the price, please?
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Laurent Martinez, Alstom SA - CFO & Senior VP of Finance [18]
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Yes. So the price, as I said, and that is, again, the magic numbers, EUR 5.8 billion to EUR 6.2 billion, including all the cash, which will be sitting in the balance sheet of Bombardier at the time of closing. And if we take, I think that was published as well in the Bombardier presentation 0.5 hour ago, their target is $1 billion of cash sitting in the Bombardier Transportation at end of 2020, which will be, I would say, belonging to Alstom at closing. So that is 1 important point, then we'll see what will be the outcome of the months and you have to come until closing. To your second point on pension. Indeed, our pension will be the main liability that we'll take on board, and we are talking about EUR 900 million.
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Henri Poupart-Lafarge, Alstom SA - Chairman & CEO [19]
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On the antitrust, Gael, we looked at the market share on Metro, Bombardier and ourselves. We have a relatively low market share in Europe. I mean, it's far from being an issue. On regular train, it's true that we are at a higher market share, if you combine regional trains boost from Alstom and Bombardier. We don't see it as a huge issue. And again, I'm not telling you that there will be no issue at all. I'm telling you that if there are some issues, that would be much easier to solve than the one we had with Siemens. So we've looked at all these different platforms. And if there are some issues, it would be, I would say, marginal as compared to the deal. Like signaling, we are basically -- the commission wanted us to dispose the equivalent of Alstom in signaling. So they don't want just to have any type of consolidation in signaling because of this factor. If the commission is asking something in a very specific product range and platform, it's not a problem, I would tell you, a problem per se.
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Operator [20]
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(Operator Instructions) We will now take our next question from Akash Gupta of JP Morgan.
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Akash Gupta, JP Morgan Chase & Co, Research Division - Research Analyst [21]
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My question is about Bombardier joint ventures and particularly, the ones in China. So because of this transaction, there may be a change of control clause that might trigger. So have you -- can you talk about, is there any risk that some of these joint venture adding to this, that your JV partner may have option to buy Bombardier portion in that -- in these ventures and that could trigger the scope of Bombardier Transportation being different at the time of closing than what it is today?
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Henri Poupart-Lafarge, Alstom SA - Chairman & CEO [22]
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I guess, we've looked at that. This is not our anticipation. Now, obviously, we are not going into all the details of all the clauses and so forth. In China, anyhow, it's the question of change of control or not. You need to be welcome to work in China. And we will work on that. And we don't see any reason why the policy of China will change because it's Alstom and not Bombardier. So we don't expect a major issue there.
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Operator [23]
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We will take our next question from William Mackie of Kepler Cheuvreux.
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William Mackie, Kepler Cheuvreux, Research Division - Head of Capital Goods Research [24]
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Can we go back to your estimates or the synergies from the transaction? And could you just walk us -- I can see the main rationale that you make for the transaction. But could you walk us through your expected costs to realization of those synergies over the next 4 to 5 years? Or put another way, what assumptions have you incorporated within your calculation of the EUR 3 billion NPV related to the combination of the companies?
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Laurent Martinez, Alstom SA - CFO & Senior VP of Finance [25]
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So getting to the bottom of your question, as estimated, I would say, integration, transformation, restructuring cost is EUR 400 million, is around EUR 400 million, so i.e., 1 year of run rate of synergies. So this is what we have assumed in our overall synergies value creation. Now if I get into the bucket of these synergies, procurement represents a good 1/3 of the synergies and there is limited cost associated to it, obviously, because it is volume gain. Everything which is product-related around the design, the project management, the platforming represents as well a good 25% of what we see in terms of synergies. Around the G&A is pulling on R&D projects and, of course, more efficiencies in terms of the support function.
And finally, there is some synergies in terms of industrial elements. All of this, in terms of this 1 year of transformation cost includes as well the IT integration and some of the process, I would say, deployment that we will basically enable and deploy in the years to come with Bombardier.
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Operator [26]
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We will take our next question from Guillermo Peigneux of UBS.
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Guillermo Peigneux-Lojo, UBS Investment Bank, Research Division - Executive Director and Industrials Analyst [27]
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Gentlemen, I hope you can hear me. The question that I have is related to your working capital expansion plans, whether with the complexities around this, actually, you may have to, the per sum of those expansion plans that you basically have in the working capital as we speak. And then obviously, the similar question regarding to Bombardier, are you aware of any plans of both actually the new CapEx and new plans being deployed by Bombardier? And similarly, any potential working capital expansion plans that they may have in front?
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Laurent Martinez, Alstom SA - CFO & Senior VP of Finance [28]
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So on the working capital on the Alstom side, no change compared to the latest discussion we had for '19, '20 and 2021, so no surprise on this. If I look at the Bombardier side, there is -- in terms of CapEx, there is -- the footprint is existing. So there is losing a major CapEx to be planned in the next years, and we will have ample capacity to serve the booming market we have. In terms of working cap, there is, definitively I would say, expected deliveries in the year 2020 for Bombardier, which will -- should unwind the working capital as of end of 2019. So this is what we are expecting in the 12 to 18 months to come.
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Henri Poupart-Lafarge, Alstom SA - Chairman & CEO [29]
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Thank you for your time. Thank you for your attention tonight. We'll be happy to talk soon, to update you on this transaction. Thanks a lot, and talk to you soon. Bye-bye.
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