- General Electric confirmed it will merge its transportation business with Wabtec, a U.S. manufacturer of equipment for the rail industry, in a deal valued at about $11.1 billion.
- GE and its shareholders will own 50.1 percent of the combined company, while Wabtec shareholders will own the rest, the companies said in a statement.
Pared back to the core
Flannery told GE shareholders late last 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.
That should include GE getting rid of at least $20 billion of assets through sales, spin-offs or other means.
Based on Wabtec’s stock price on April 19, the last unaffected trading day prior to media speculation regarding a potential transaction, the value of the transaction is approximately $11.1 billion, the companies said.
When adjusted for the net tax step-up value of $1.1 billion accruing to the combined company, the transaction value is $10 billion. The transaction is expected to be tax-free to the companies’ respective shareholders.
GE’s transportation business, which generated revenue of $4.7 billion last year, manufactures freight and passenger trains, marine diesel engines and mining equipment, among other products.
Wabtec, which has a market capitalization of $9.2 billion, manufactures equipment for locomotives, freight cars, and passenger transit vehicles.
GE’s stock has lost about half its value in the last year, and the company has been working with activist hedge fund Trian Fund Management, which sits on its board of directors, to turn the business around.
GE shares were up 2.1 percent at $15.30 in premarket trading, while Wabtec shares rose 1.4 percent to $96.51.
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