GE to merge rail division with Wabtec

Grant Boone
May 22, 2018

General Electric has announced that it was unloading the bulk of its transportation business which makes train engines to Wabtec Corp, a U.S. manufacturer of equipment for the rail industry. The company has received $3.6 billion in orders in the last two quarters.

According to the announcement, Wabtec and GE Transportation will be combined into a wholly owned subsidiary of Wabtec. The company's shares closed Monday at $15.26, up 29 cents, or nearly 2 percent.

The deal is tax-free for GE and Wabtec shareholders because it is structured as a so-called Reverse Morris Trust, with GE spinning off the transportation unit and simultaneously merging it with Wabtec. 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. Wabtec shares were not trading premarket. And it's just Wabtec, with none of the ham-handed nonsense that gave us Baker Hughes, a GE Co.

"We've always been quite interested".

Wabtec's chairman Mr Albert Neupaver has been named executive chairman of the merged company, and Mr Raymond Betler will be president and CEO.

GE Transportation generated $3.7 billion in revenue a year ago but did not fit into CEO John Flannery's strategy of focusing on three core segments: power, including renewable energy, aviation, and health care.

Garage Sale       GE is still too sprawling and diverse even after years of streamlining              Source Bloomberg
Garage Sale GE is still too sprawling and diverse even after years of streamlining Source Bloomberg

The combined company will have more than 23,000 locomotives globally. It's also tax-efficient: The transaction allows for $150 million of annual cash tax savings for the next 15 years.

Wabtec, also known as Westinghouse Air Brake Technologies Corp., services the passenger transit and freight rail industries. It has been speculated that GE's deal with Wabtec will now provide a ray of hope for the former's ailing businesses.

Several actions have been taken by GE to cut back on it portfolio over the last few years, as its cuts plastics, NBCUniversal, as well as the majority of its GE Capital business.

That should include GE getting rid of at least $20 billion of assets through sales, spin-offs or other means.

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.

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