CAE says the project will cost the company a total of around $700 million over a period of five years.
CAE, Inc. (TSE:CAE, Mkt cap 4.02B, P/E 22.89, Div/yield 0.06/1.57, EPS 0.67, Shares 262.21M,) a Canada-based manufacturer of simulation devices, has secured $250 million in funding from the federal government to help finance Project Innovate, the company’s next-generation flight simulators and training device development program.
The project will cost the company a total of around $700 million over a period of five years, CAE’s chief financial officer Stéphane Lefebvre commented after the company announced the financing.
The long-term loan is being provided through the government’s Strategic Aerospace and Defence Initiative (SADI) in the form of a repayable investment at a low interest rate. This is the third government financial package obtained by CAE in eight and a half years and brings the total amount granted by Ottawa to over $700 million, the Montreal Gazette commented. This financing has been used to support the development of CAE’s simulator lines as part of the Phoenix, Falcon and Innovate projects.
According to Lefebvre, the investment is of strategic importance for CAE as it will help the company keep its competitive edge in the sector. Competition has increased recently, especially after major defence firms entered the simulation market through acquisitions, he told reporters.
Lefebvre was referring to the acquisition of Sim-Industries B.V. by defence major Lockheed Martin Corp in 2011 and the sale of Thales Training & Simulation Ltd to L-3 Communications in 2012. Most recently, in late 2013, Texas-based Textron Inc bought Montreal-based simulation firm Mechtronix Inc.
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