GE will retain a 50.1 percent stake in the combined entity, with the Boston-based company to receive a $2.9 billion cash payment in the deal. The transaction is expected to close in early 2019. GE Transportation is in the business of making engines for the marine industry, electric drives for the mining industry, and locomotives. 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 put its rail unit on the market past year in an effort to streamline operations and reduce the complexity that Mr Flannery blames for deepening the company's problems. Besides locomotive and railcar parts, it also produces products such as railroad signaling equipment, and provides fix services for GE and other locomotives.
A Reverse Morris Trust transaction will provide allowance to the company so that it can avoid a big tax bill by spinning off a unit that it wants to divest and simultaneously merging it with another company.
GE stock traded up about 2.7% in Monday's premarket session, at $15.37 in a 52-week range of $12.73 to $29.47. GE was among Monday's top performers on the Dow Jones industrial average. The transportation company reported $0.92 EPS for the quarter, topping analysts' consensus estimates of $0.90 by $0.02. "Our two companies have more than 250 years of rail industry heritage, and our shared focus on safety, reliability, quality and customer relationships will enable a smooth integration".
"Together, we can expand our global reach, strengthen our market capabilities and lead digital innovation across the transportation industry", said Santana.
The equity value of the company combining Wabtec and GE's transportation business will be more than $20 billion. GE's overall 2017 revenue totaled $122.1 billion, according to GE's annual 10-K filing.
Wabtec Chairman Albert J. Neupaver will be the new firm's executive chairman, and Raymond T. Betler, the company's president and CEO, will hold the same roles with the new concern.
If the deal to merge GE's underperforming transportation business with Wilmerding, Pennsylvania-based Wabtec goes through, it would represent the company's biggest divestment since Flannery took over as CEO last August.