GE merges transportation unit with Wabtec in $11.1bln deal

  • GE merges transportation unit with Wabtec in $11.1bln deal

GE merges transportation unit with Wabtec in $11.1bln deal

General Electric confirmed it is merging its GE Transportation locomotive business with Wabtec, valuing the transaction at $11.1 billion.

The deal, first reported by Reuters on Sunday, is the biggest to be inked thus far by GE Chief Executive John Flannery since he announced a major overhaul of the us industrial conglomerate late a year ago.

Industry analysts project that the merger will boost the growth of GE's transportation business in the near future.

In November 2017, when GE chair John Flannery confirmed rumours that the company was looking to offload its transport division, reports circulated that while the business had grown on the global front - GE Transportation has recently secured big contracts in Ukraine and India - there had been a downturn in demand in North America.

Wabtec shares traded up about 2.3% to $97.35, in a 52-week range of $69.20 to $95.54.

GE's transportation unit had been speculated about for months as a potential target for a spin-off or sale as the Boston-based industrial giant looked to restructure its businesses and turn around lagging financial performance.

The $11.1 billion deal value includes a $1.1 billion net tax benefit accruing to the combined company, GE and Wabtec said.

"Our two companies have more than 250 years of rail industry heritage, and our shared focus on safety, reliability, quality, and customer relationships will enable a smooth integration". It also combined its oilfield services business with Baker Hughes ( BHGE.N ).

"We've always been quite interested".

"For a whole host of reasons, the stars kind of lined up this time, and it presented an opportunity for us to actually get it done".

Effective immediately, Wabtec Chairman Albert Neupaver has been re-appointed executive chairman, while Raymond Betler remains Wabtec's president and chief executive officer. GE Transportation President and CEO Rafael Santana will run the freight division.

The resulting company will have approximately $8 billion in revenues, the companies said.

A Reverse Morris Trust transaction allows a company to avoid a big tax bill by spinning off a unit that it wants to divest and simultaneously merging it with another company.

Wabtec, or Westinghouse Air Brake Technologies Corporation, now has a market capitalization of $9.2bn in the rail and transit industry, whilst GE Transportation generated $4.7bn in annual revenues in 2017. The company has a market capitalization of $9.17 billion, a PE ratio of 27.75, a P/E/G ratio of 2.15 and a beta of 0.91.