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General Electronic will combine transport unit with Wabtec

General Electronic will receive $2.9 billion in cash and 50.1 percent stake
BY BEx Bureau
BusinessEx
May 22, 2018

General Electric will combine its locomotive unit with Wabtec, who makes passenger and freight locomotives. The deal closed at $ 11.1 billion on Monday. This deal is one of the biggest step taken by GE Chief Executive John Flannery since he announced a major overhaul of the U.SU.S. industrial conglomerate late last year.

GE will take a 50.1 percent stake in the combined company as part of its deal with Wabtec, which traces its roots to 1869 and is worth about $9bn.The deal is tax-free for GE and Wabtec shareholders because it is structured as a so-called Reverse Morris Trust, with GE spinning off the transportation unit and simultaneously merging it with Wabtec.

The 11.1 billion deal includesa $1.1 billion net tax benefit accruing to the combined company, GE and Wabtec said. The equity value of the company combining both's transportation business will be more than $20 billion.The resulting company will have approximately $8 billion in revenues, with 27,000 employees across 50 countries, the companies said. The deal is expected to close in early 2019.

Wabtec chief executive Raymond Betler will remain president and chief executive of the merged company while its chairman,Albert Neupaver, has been reappointed executive chairman.

GE has face shortage of cash because of the weakness ofits power equipment division and its operations serving the oil and gas industry, forcing it to cut its dividend last year and selling can help in raising cash.

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