Wabtec closing in on $20bn GE Transportation deal

Wabtec GE Transportation Merge To Form Transportation Systems Holdings In $11 Billion Deal

General Electric said Monday it will merge its train engine division with railroad manufacturing firm Wabtec in an $11.1 billion deal that marks the biggest step so far in GE's restructuring of its operations. During the same quarter a year ago, the company earned $0.77 earnings per share. The century-old GE Transportation - one of eight major GE segments - was seen as a prime candidate for divestiture even as GE shrank its portfolio by shedding health care technology and other smaller assets.

GE's transportation unit had been speculated about for months as a potential target for a spin-off or sale as the Boston-based industrial giant looked to restructure its businesses and turn around lagging financial performance.

Wabtec Chairman Albert Neupaver has been named Executive Chairman of the merged company, and Raymond Betler will be President and CEO, retaining his current Wabtec role.

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.

Wabtec shares traded up about 2.3% to $97.35, in a 52-week range of $69.20 to $95.54. And it's just Wabtec, with none of the ham-handed nonsense that gave us Baker Hughes, a GE Co. "There has been a relationship between (us) that goes back decades", he said. GE Transportation chief Rafael Santana will run Wabtec's freight segment.

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The combined company will have about $8 billion in annual revenue, with GE Transportation's backlog of orders numbering 1,800 locomotives at present. The company has a market capitalization of $9.17 billion, a PE ratio of 27.75, a P/E/G ratio of 2.15 and a beta of 0.91.

The deal will add more offerings that can improve efficiency and safety to GE's customers, which include Komatsu Ltd and Rio Tinto PLC, as well as Wabtec's client base which includes Siemens AG and Bombardier Inc, Santana added.

The company's transportation business, which past year had $4.7 billion in revenue, manufactures passenger and freight trains, mining equipment and marine diesel engines, amongst others.

The stocks of GE has, however, lost about half its value in the previous 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.

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