General Electric Co. agreed to merge its century-old locomotive business with rail-equipment maker Wabtec Corp. in a deal valued at $11.1 billion, the biggest step yet in Chief Executive Officer John Flannery’s plan to shed unwanted units and revitalize the beleaguered manufacturer.
GE will receive $2.9 billion in cash while the company and its shareholders take a 50.1% stake in the combined entity, according to a statement Monday. Wabtec shareholders will hold the rest after the tax-free transaction, which is expected to close early next year.
GE put its rail unit on the market last year in an effort to streamline operations and reduce the complexity that Flannery blames for deepening the company’s problems. Faced with one of the worst slumps in GE’s 126-year history, the CEO has pledged to cut costs and refocus the Boston-based manufacturer on key markets, such as aviation and energy.
The deal is transformative for Wabtec, which will roughly double its annual revenue by adding one of the world’s largest makers of freight locomotives and rail equipment. The Wilmerding, Pa.-based company said it was attracted to the complementary products and a growing order book after several lean years for the industry.
“Together we have a unique opportunity to drive tremendous growth in 2019 and beyond as the industry continues to improve,’’ Wabtec CEO Raymond Betler said in the statement. He will remain in the same role after the deal closes.
GE advanced 2.4% to $15.33 ahead of regular trading in New York. The stock declined 14% this year through Friday, while the S&P 500 Index has increased 1.5%. Wabtec shares weren’t trading premarket.
By Richard Clough
