By Allison Lampert and Nichola Saminather
MONTREAL/TORONTO (Reuters) - Alstom (PA:ALSO) SA has a "strong case" to acquire Bombardier Inc's rail business for up to 6.2 billion euros, without making too many important concessions, the chief executive of Canadian pension fund Caisse de dépôt et placement du Québec (CDPQ) said.
The companies on Monday announced the proposed deal, which is likely to draw scrutiny from competition regulators and unions concerned about job cuts. It would make the combined entity the world's second-biggest train maker after China's state-owned CRRC Corp.
Charles Emond, Caisse's recently appointed CEO, said on Thursday the deal could succeed because of its contrast with an attempted merger between Alstom and Germany's Siemens AG (DE:SIEGn) which failed last year due to antitrust concerns.
"I think we’ve a got a very strong case to actually see this go through,” Emond told reporters in Montreal after Caisse reported a 10.4% average weighted return in 2019, driven by its equity investments.
Canada's second-largest pension fund, which owns a 30% stake in Bombardier's rail division, would end up with an 18% stake in Alstom after the deal's approval.
Apart from having different footprints and less overlap than Alstom and Siemens, Emond said the French company has learned from its last attempt at consolidation.
"I think we’ve got a strong case to end up in a place where remedies if any would not be that important. I think it’s a fairly different situation."
He said he thinks Alstom "has been quite proactive this time around," and European regulators were informed about the deal.
“I know a courtesy head’s up has been given,” he said.
Caisse, which invests on behalf of some 6 million workers and retirees in Canada's mostly French-speaking province of Quebec, posted a -2.7% return from its real estate assets as valuations fell in its Canadian shopping center portfolio.
The fund also aims to sell about a third of its 25 Canadian malls, said Nathalie Palladitcheff, chief executive of the pension fund's real estate unit Ivanhoe Cambridge.
Ivanhoe is focusing on industrial and logistics assets as Canada, like other countries, moves away from traditional shopping centers, Palladitcheff told reporters.
CDPQ's overall annualized returns over five and 10 years were 8.1% and 9.2%, respectively, the fund said. That compares with five-year returns of 10.4% for the Canada Pension Plan Investment Board, the nation's biggest, and 8% for the Ontario Teachers Pension Plan.
Caisse underperformed the benchmark's 11.9% return in 2019.
CDPQ's total assets rose to C$340 billion ($256.8 billion) as of Dec. 31, from C$310 billion a year earlier.
