Wabtec Corp. has entered into a definitive agreement to combine with GE Transportation, a unit of General Electric Co. The combination will make Wabtec a Fortune 500, global transportation leader in rail equipment, software and services, with operations in more than 50 countries.
Under the agreement, which has been approved by the Boards of Directors of Wabtec and GE, GE will receive US$2.9 billion in cash at closing and GE and its shareholders will receive a 50.1% ownership interest in the combined company, with Wabtec shareholders retaining 49.9% of the combined company. The transaction is expected to be tax free to the companies’ respective shareholders.
Both companies said they expect to benefit from the cyclical tailwinds they are experiencing as industry conditions improve. GE Transportation revenues and EBIT are expected to grow at double-digit CAGRs from 2017A to 2019E as the cycle rebounds from trough levels. The GE Transportation business is positioned for a significant rebound, with estimated adjusted EBITDA growing from about US$750 million in 2018 to between US$900 million and US$1 billion in 2019, the companies said. The backlog of approximately US$18 billion includes about 1800 new locomotives and approximately 1000 to be modernized. GE Transportation has received US$3.6 billion in orders in the last two quarters. Wabtec reported a strong Q1, also forecasting robust growth for the year with record backlog.