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[CNJRoss]

The Wall Street Journal via Morningstar, 10/27/17:

GE Looks to Shed Train Business

Locomotive building may not survive CEO's plan to cut more than $20 billion in assets

 

General Electric Co. is looking to exit from the railroad business, one of its oldest, as new Chief Executive John Flannery seeks to streamline the conglomerate.

 

The Boston-based company is exploring options for the GE Transportation division, according to people familiar with the matter, as a major part of Mr. Flannery's plans to divest more than $20 billion worth of assets in the next two years.

 

The company, the people said, is looking to partner, spin off or possibly sell the operations, which primarily produce diesel-powered locomotives and railroad equipment. An outright sale could trigger a big tax hit since GE has owned the business for a century and it is valued so low on its books, one person said.

 

Although GE is one of the world's biggest makers of freight locomotives, the business is cyclical and has been suffering lately from slack demand. In the first nine months of 2017, the unit's revenue slipped 8% and profits fell 15%. The division accounted for $4.7 billion of GE's total revenue of $123.7 billion last year.

 

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[Sloan]

 

 

Monday the 13th at General Electric: The 125-year-old corporation, among the world’s oldest, announced a massive, aggressive downsizing and restructuring, a reduced dividend, and an in-the-works divestiture of its storied Transportation division, one of the world’s largest, most successful builders of railway locomotives.

The rest of Railway Age Editor Bill Vantuono's commentary is here:

 

http://www.railwayag...html?channel=00

[CNJRoss]

Reuters via CNBC 5/21/18:

GE merges transportation unit with rail equipment maker Wabtec in $11.1 billion deal

• General Electric confirmed it will merge its transportation business with Wabtec, a U.S. manufacturer of equipment for the rail industry, in a deal valued at about $11.1 billion.
• GE and its shareholders will own 50.1 percent of the combined company, while Wabtec shareholders will own the rest, the companies said in a statement.

 

General Electric confirmed on Monday it was unloading the bulk of its transportation business which makes train engines to Wabtec, a U.S. manufacturer of equipment for the rail industry, in a deal valued at about $11.1 billion.

 

The deal, flagged to Reuters by sources who declined to be named on Sunday, is the biggest done by Chief Executive John Flannery since he announced a major overhaul of the U.S. industrial conglomerate late last year.

 

GE will receive a $2.9 billion up-front payment in cash and its shareholders will own 50.1 percent of the combined company, while Wabtec shareholders will own the rest, the companies said in a statement.

 

 

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[CNJRoss]

GE Transportation and Wabtec joint news release:

 

Wabtec and GE Transportation to Merge, Creating Global Leader for Rail Equipment, Services and Software

 

Strategic Combination Will Drive Shareholder Value Creation by Accelerating Innovation in Transportation and Logistics

• Following the transaction, Wabtec will have approximately $8 billion in revenues, a more diversified business mix, higher margins, and approximately 15 percent cash EPS accretion in year one.
   
• Both businesses are expected to benefit from the cyclical tailwinds they are experiencing as industry conditions improve. Complementary businesses and large global installed base will create additional opportunities for cross-selling, aftermarket services growth and new solutions in a rapidly evolving industry.
   
• GE Transportation is positioned for a substantial rebound, with estimated adjusted EBITDA growing from about $750 million in 2018 to between $900 million and $1 billion in 2019.
   
• Substantial annual run-rate synergies of $250 million and a net present value of approximately
  $1.1 billion of net tax benefit will accrue to the combined company.
   
• The transaction is valued at approximately $11.1 billion.When adjusted for the net tax benefit of
  $1.1 billion accruing to the combined company, the transaction value is $10 billion. The 2019 EBITDA multiple range including synergies and tax benefits is approximately 9x, and the 2019 EBITDA multiple range excluding synergies and tax benefits is approximately 11.75x.
   
• Strong free cash flow to enable rapid debt reduction, maintain Wabtec’s quarterly dividend and preserve investment grade credit rating.
   
• Wabtec Chairman, Albert J. Neupaver, has been re-appointed executive chairman; Raymond T. Betler will remain president and CEO of the merged company; Rafael Santana, president and CEO of GE Transportation, will become president and CEO of Wabtec’s Freight Segment and Stéphane Rambaud-Measson, will become president and CEO of Wabtec’s Transit Segment.

 

WILMERDING, Pa. and CHICAGO, May 21, 2018 – Wabtec Corporation (NYSE: WAB) has entered into a definitive agreement to combine with GE Transportation, a unit of General Electric Company (NYSE: GE). 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 $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 are expected 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 $750 million in 2018 to between $900 million and $1 billion in 2019. The backlog of approximately $18 billion includes about 1,800 new locomotives and approximately 1,000 to be modernized. GE Transportation has received $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. 

 

The combination will bring together two global leaders in rail equipment, services and software, combining GE Transportation, a global digital industrial leader and supplier to the rail, mining, marine, stationary power and drilling industries, with Wabtec’s broad range of freight, transit and electronics solutions. Wabtec and GE shareholders will have ownership in a combined company with significantly expanded margins, a highly attractive growth profile based on an improved business mix, expanded global reach, and faster innovation in key growth areas.

 

KEY STRATEGIC BENEFITS

The combination is expected to:

• Drive increased value for shareholders: With approximately $8 billion in combined revenues and a large global installed base, the combined company will have a leading position in key freight rail and transit geographies worldwide, and will be well-positioned to serve customers as industry demand continues to improve. Investors are expected to benefit through ownership of a stronger, more diverse business better positioned to perform through the cycle, with expected annual double-digit EPS growth and total run-rate synergies of about $250 million estimated to be achieved by 2022. Furthermore, the transaction will facilitate a tax step-up with an NPV of approximately $1.1 billion of net tax benefit accruing to the combined company.
   
• Create a leading equipment, aftermarket services, and digital solutions provider across the transportation ecosystem: From factory to final destination – and every point in-between – the combined company will have the capabilities to accelerate lifecycle solutions for the transportation industry and unlock significant productivity for customers by improving interoperability, efficiency, and competitiveness.
   
• Capitalize on digital/electronic technologies to develop autonomous capabilities: Bringing together GE Transportation’s digital solutions with Wabtec’s electronic systems is expected to drive the advancement and implementation of technology solutions to improve safety, efficiency and productivity for the transportation industry. This combination will create a compelling offering to meet the industry's rapidly growing demand for rail performance, with the potential to unlock billions in annual savings across freight rail for customers and operators.
   
• Generate growth opportunities through the extensive installed base and attractive global footprint: The combined company will be a leading global freight and transit rail provider with more than 23,000 locomotives in its global installed base and content on virtually all locomotives and freight cars in North America, creating significant opportunities for aftermarket parts and services in key regions around the world.

Effective immediately, Wabtec Chairman Albert J. Neupaver has been re-appointed executive chairman of the company, while Raymond T. Betler remains Wabtec’s president and CEO. Following the completion of the transaction, Stéphane Rambaud-Measson will become president and CEO of Wabtec’s Transit Segment; and Rafael Santana, president and CEO of GE Transportation, will become president and CEO of Wabtec’s Freight Segment.

 

Betler said: “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. By bringing together our highly complementary strengths we are confident that this transformational combination will create value for both Wabtec and GE shareholders, innovative solutions for our customers, and new outlets for long-term career growth for our employees. 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.”

 

Santana said: “The combination of our two strong brands and remarkable people is an excellent fit that will create an organization well-positioned to accelerate the future of transportation. Together, we can expand our global reach, strengthen our market capabilities and lead digital innovation across the transportation industry. We are seeing growth in rail traffic and recent promising orders for new and modernized locomotives from North American Class I, Shortlines and international railroads, and are confident in the compelling long-term opportunities and synergies before us.”

 

GOVERNANCE AND HEADQUARTERS

Following the completion of the transaction, Wabtec’s corporate headquarters will remain in Wilmerding, Pa. Wabtec’s Freight Segment will be headquartered in Chicago, and Wabtec’s Transit Segment headquarters will remain in Paris.

GE will designate for nomination three independent Board members.

 

TRANSACTION DETAILS

GE will receive a $2.9 billion up-front cash payment, and GE and its shareholders will receive a 50.1% ownership interest in the combined company. Based on Wabtec’s stock price on April 19, 2018, the last unaffected trading day prior to media speculation regarding a potential transaction, the value of the transaction is approximately $11.1 billion. When adjusted for the net tax step-up value of $1.1 billion accruing to the combined company, the transaction value is $10 billion. The transaction is expected to be tax free to the companies' respective shareholders.  

 

Wabtec and GE Transportation will be combined in a transaction in which GE will (i) sell a portion of the assets of GE Transportation to Wabtec; (ii) complete the spin-off or split-off of a portion of GE Transportation to GE shareholders; and (iii) immediately thereafter merge GE Transportation with a wholly owned subsidiary of Wabtec. Upon closing, Wabtec shareholders will own approximately 49.9%, and it is planned that GE shareholders will own approximately 40.2%, and GE will own 9.9% of the merged company on a fully diluted basis. GE has the right to increase the portion of the merged company owned by GE shareholders (subject to a corresponding reduction in GE’s ownership).

 

Wabtec has obtained full commitments for a $2.9 billion bridge facility and expects to put in place permanent debt financing prior to closing.  The Company is committed to maintaining a strong investment grade credit rating profile and will use its strong cash flow to prioritize debt reduction.

 

The transaction is expected to close in early 2019, subject to customary closing conditions, approval by Wabtec shareholders, and regulatory approvals.

 

[CNJRoss]

Progressive Railroading, 5/21/18:

GE to merge rail division with Wabtec

 

 

General Electric Co. has agreed to merge its railroad business with Wabtec Corp. in a transaction valued at about $11.1 billion, the companies announced today.

The agreement has been approved by the boards of Wabtec and GE, with the transaction expected to close in early 2019, officials from both companies said in a press release.

Wabtec and GE will be combined in a transaction in which GE will sell a portion of the assets of GE Transportation to Wabtec; complete the spinoff or split-off of a portion of GE Transportation to GE shareholders; and immediately thereafter merge GE Transportation with a wholly owned subsidiary of Wabtec.

 

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[CNJRoss]

Erie (PA) Times-News, 12/25/18:
 

Union president urges Wabtec to sign temporary agreement at Erie locomotive plant

 

 

Union president Scott Slawson believes Wabtec should sign a memo of understanding that would extend the terms of the existing contract by one year or until a new contract is signed.

 

Scott Slawson, president of Local 506 of the United Electrical, Radio and Machine Workers of America at GE Transportation, isn’t yet an employee of Wabtec Corp. but expects to be soon as the Pittsburgh-area company moves ahead with plans to merge with his employer.

 

So, neither Slawson nor his union is in a position to formally negotiate with the new bosses just yet.

 

Even after the sale is finalized, it’s uncertain what becomes of the union’s four-year contract that’s set to expire in June.

 

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[CNJRoss]

Railway Age, 2/25/19:
 

Wabtec completes GE merger, posts strong financials

 

 

Wabtec Corporation has completed its merger with GE Transportation. The combined company, which is expected to boast revenues greater than $8 billion in 2019, has a compelling growth profile—especially as market conditions improve in its industries. Wabtec announced the transaction completion at the same time as its 4Q18 and full-year 2018 financials.

 

With the transaction, Wabtec said it “has established itself as a Fortune 500 global transportation and logistics leader by combining its broad range of freight, transit and electronics products with the former business unit of GE’s equipment, services and digital solutions in the locomotive, mining, marine, stationary power and drilling industries.” Furthermore, Wabtec will now be included in the S&P 500 Index.

 

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[CNJRoss]

CNN Business, 2/26/19:

GE just spun off its locomotive unit. Workers immediately went on strike

 

 

New York (CNN Business)General Electric just spun off its century-old railroad division to Wabtec. Factory workers immediately went on strike to protest the new owner's push for mandatory overtime and pay cuts for new hires.

 

About 1,700 union workers at Wabtec's newly acquired locomotive factory in Erie, Pennsylvania, walked off the job on Tuesday morning. Workers at that factory haven't organized an open-ended strike since the 1969-1970 GE-wide strike that cost the conglomerate dearly.

 

United Electrical union representatives and Wabtec (WBC) failed to reach a short-term agreement that would have kept in place the working conditions negotiated with GE (GE), the factory's longtime former owner.

 

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[CNJRoss]

GoErie.com, 2/27/19:
 

Erie union calls it a lockout; Wabtec calls it a strike

 

 

Union President Scott Slawson: “We offered to work under existing terms and conditions and the company said no.”

 

Members of the United Electrical, Radio and Machine Workers of America — about 1,700 of them — remained on the picket line Wednesday outside the former GE Transportation plant in Lawrence Park Township, owned since Monday by Westinghouse Air Brake Technologies Corp.

 

As the work stoppage continued into its second day, UE 506, which represents all but a handful of the plant’s union workers, was stressing to its members that the work stoppage should be called a lockout.

 

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