Bombardier announced yesterday that discussions with DaimlerChrysler AG of Stuttgart, Germany have failed to result in an agreement as to the value of the adjusted net assets acquired in connection with the acquisition of DaimlerChrysler Rail Systems GmbH (Adtranz).
Under these circumstances, Bombardier has notified DaimlerChrysler that it will file a claim against it for damages under the arbitration process governed by the rules of arbitration of the International Chamber of Commerce, as set forth in the Sale and Purchase Agreement (SPA).
Under the SPA, DaimlerChrysler made contractual representations and guarantees to Bombardier, including confirmation of a level of equity of Adtranz, on the closing date of April 30, 2001.
Bombardier’s claim for damages is largely based on material breaches of contractual representations and guarantees, including significant deficiency in the value of the adjusted net assets acquired. Such deficiency results from the application of United States generally accepted accounting principles (US GAAP) and from unrecorded costs required to complete contracts with third parties. Bombardier’s claim will be in the order of €1 billion ($1.4 billion Cdn).
Bombardier Management has established the purchase price allocation taking into account all relevant information as detailed in its third quarterly report to shareholders dated November 26, 2001. Resolution of the claim will result in a reduction of the goodwill related to the acquisition of Adtranz.