GE to Merge Rail Division With Wabtec in $11 Billion Deal

By Thomas Gryta 

General Electric Co. agreed to merge its railroad business with Wabtec Corp. in a deal valued at about $11 billion, letting GE raise some cash to fund its turnaround and shed one of its oldest operations.

The transaction is the first major portfolio move in new GE CEO John Flannery's attempt to revamp the struggling conglomerate. Wabtec, also known as Westinghouse Air Brake Technologies Corp., makes equipment for transit systems and freight railroads and has a market value of about $9 billion, based on Friday's closing price.

GE will receive $2.9 billion in cash at closing. GE shareholders will own 40.2% of the combined company, with GE owning about 9.9% after the deal.

Wabtec shareholders will retain 49.9% of the combined company. Wabtec's current chairman and CEO will retain their positions after the deal, which is expected to close in early 2019.

GE has been looking at options for the transportation division since at least last fall. The segment mainly produces freight locomotives, which sell for millions of dollars apiece, along with mining equipment and marine motors.

The locomotive business is cyclical and has been hit by decreased demand. In 2017, the unit's revenue slipped 11% and profit fell 23%. The division accounted for $4.2 billion of GE's total 2017 revenue of $122.1 billion.

The transportation unit is one of the smaller of GE's seven major business lines. The division had about 8,000 employees at the start of the year, down 2,000 from a year earlier, and compares with 313,000 at GE in total.

GE's diesel locomotives are primarily assembled in Fort Worth, Texas, and western Pennsylvania.

Write to Thomas Gryta at [e-mail]

(END) Dow Jones Newswires

May 21, 2018 08:25 ET (12:25 GMT)

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