GE Close to Merging Transportation Division with Wabtec

General Electric is seen at its plant in Baden Switzerland

On Sunday, it was reported that General Electric is planning to get into a deal of merging its transportation business which deals with manufacture of train engines, with Wabtec, an USA equipment maker for the rail industry. But the "extreme cyclicality and uneven order flow" of the business has hurt both GE Transportation and Wabtec (formerly Westinghouse Air Brake Technologies), CFRA analyst Jim Corridore wrote Monday. Since last autumn GE has been exploring options for the transportation division. GE is based in Boston.

"Wabtec and GE Transportation are global industry leaders and we believe that together we have a unique opportunity to drive tremendous growth in 2019 and beyond as the industry continues to improve", Betler says. Cowen reissued a "buy" rating and issued a $90.00 price objective on shares of Wabtec in a research note on Monday, April 23rd.

GE has combined its business of oilfield services with that of Baker Hughes.

The resulting company will have approximately $8 billion in revenues, the companies said.

GE's transportation business, which generated revenue of $3.9 billion past year, is already larger than its sole close peer in the railroad engines business, Caterpillar Inc, selling equipment and services to a global fleet of roughly 23,000 locomotives, Santana said.

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"For a whole host of reasons, the stars kind of lined up this time, and it presented an opportunity for us to actually get it done".

Betler will remain president and CEO of the merged company while its chairman, Albert Neupaver, has been re-appointed executive chairman. Mr Rafael Santana, president and CEO of GE Transportation, will become president and CEO of Wabtec's freight division headquartered in Chicago, and Ms St├ęphane Rambaud-Measson will become president and CEO of Wabtec's transit division based in Paris.

The strategic merger is expected to be tax-free to shareholders of GE and Wabtec.

Wabtec says it has obtained full commitments for a $US 2.9bn bridge facility and expects to put in place permanent debt financing prior to closing the deal. 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. Flannery is considering sales, spinoffs and even a broader breakup of GE's core aviation, power and health businesses.

GE has seen its stock price plummet in recent years, and the company's management has talked about options for restructuring.

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