GE Nears Deal To Merge Transportation Unit With Wabtec, Sources Say

GE Nears Deal To Merge Transportation Unit With Wabtec, Sources Say

Under the terms of the transaction, GE will receive $US 2.9bn in cash for a 9.9% stake in the new company while its shareholders will receive a 40.2% stake.

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

The parent had been shopping the unit since November, when GE Chairman and CEO John L. Flannery, stung by the company's poor financial performance and confronting a top-heavy organization, vowed to streamline the Boston-based colossus.

Wells Fargo's Allison Poliniak-Cusic likes the deal for WAB, "with GE's locomotive positioning coupled with its increasing focus on digital and analytics being additive to Wabtec's portfolio".

Flannery told GE shareholders late previous year he plans to pare GE down to three core businesses: power, aviation and healthcare, a departure from the deal-driven empire building of his predecessors, Jeff Immelt and Jack Welch.

Completed Norfolk Southern AC44C6M at GE Transportation’s GEMS plant in Fort Worth. William C. Vantuono
Completed Norfolk Southern AC44C6M at GE Transportation’s GEMS plant in Fort Worth. William C. Vantuono

Wabtec Executive Chair Albert J. Neupaver will retain his position, as will Wabtec CEO Raymond T. Betler. 412,225 shares of the company traded hands, compared to its average volume of 967,086. If you find anything in DC VELOCITY you feel is inaccurate or warrants further explanation, please?Subject=Feedback -: "GE Transportation spins off rail unit in $11.1 billion merger with Wabtec" contact Chief Editor David Maloney. It also combined its oilfield services business with Baker Hughes ( BHGE.N ).

The deal caps a review of the transportation division by GE dating back to last year after a string of setbacks for the 126-year-old company.

If the deal to merge GE's underperforming transportation business with Wilmerding, Pennsylvania-based Wabtec goes through, it would represent the company's biggest divestment since Flannery took over as CEO last August. While Wabtec manufactures equipment for locomotives, freight cars and passenger transit vehicles. The company had revenue of $1.06 billion for the quarter, compared to analyst estimates of $1.01 billion. It's also tax-efficient: The transaction allows for $150 million of annual cash tax savings for the next 15 years.

Share price of GE stock lost close to half if overall value over the last 12 months, and the conglomerate has worked with Trian Fund Management an activist shareholder and member of the board to turn business around.

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