GE to merge transportation unit with Wabtec in $11.1 bn deal

Leslie Hanson
May 22, 2018

Westinghouse Air Brake Technologies Corporation, doing business as Wabtec Corporation, provides technology-based equipment, systems, and services for the freight rail and passenger transit vehicle industries worldwide.

The new chief has vowed since taking over to unload $20 billion in assets to raise cash for turning the troubled conglomerate around.

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. Sources cite that the deal is expected to evaluate the combined firm at over United States dollars 20 billion.

Under the terms of the transaction, GE will receive $2.9 billion in cash for a 9.9% stake in the new company, while its shareholders will receive a 40.2% stake. The transaction is expected to be tax free to the companies´ respective shareholders.

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. But it also follows years of on-and-off talks between Wabtec and the GE unit about combining, Wabtec Chief Executive Raymond Betler told Reuters in an interview.


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 worldwide front - GE Transportation has recently secured big contracts in Ukraine and India - there had been a downturn in demand in North America. German engineering giant Siemens (SIEGY) and France's Alstom are in the process of merging their rail businesses in Europe.

General Electric is one of the world's biggest makers of locomotives.

Last month, the CEO of General Electric, Flannery, had told its shareholders that the company is "keenly aware of the pain" caused by its poor performance and dividend cut previous year.

The GE Transportation business is positioned for a significant rebound, with estimated adjusted earnings before interest, taxes, deprecation and amortization (EBITDA) growing from about $750 million in 2018 to between $900 million and $1 billion in 2019. GE's overall 2017 revenue totaled $122.1 billion, according to GE's annual 10-K filing.

Betler will remain president and CEO of the merged company while its chairman, Albert Neupaver, has been re-appointed executive chairman.

Other reports by Iphone Fresh

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