GE Transportation, Wabtec Corp. merge in $11 billion deal

Mike Snider | USA TODAY

General Electric will merge its train engine division with railroad manufacturing firm Wabtec in an $11 billion deal, a major move in GE CEO John Flannery's mission to streamline the Boston-based conglomerate.

Wabtec Corp., based near Pittsburgh in Wilmerding, Pa., will pay GE a $2.9 billion upfront payment and Wabtec shareholders will own about 49.9% of the combined company, when the deal closes in early 2019, the companies said Monday. GE shareholders will own about 40.2% and GE will own 9.9% of the merged company.

Originally known as Westinghouse Air Brake Technologies Corp., Wabtec is valued at $9.1 billion. The rail equipment company has 18,000 employees and generated about $3.9 billion in revenue in 2017. GE Transportation, which includes locomotives and rail services, has about 9,000 employees and generated about $4.2 billion in revenue in 2017.

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“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," said Wabtec CEO Raymond Betler, who will serve as president and CEO of the combined company.

"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.”

Executives did not address what effect the merger might have on jobs, but did say the merged company is expected to generate about $250 million in annual synergies by 2022, and gain a tax benefit of about $1.1 billion.

Speculation about the deal emerged last month. Flannery, who in June succeeded former CEO Jeff Immelt, has been overseeing a comprehensive review at GE. Last year, he said the company would reduce its assets by $20 billion.

GE's transportation unit, which included locomotives, mining technology and marine engines, did not fit within the company's planned refocus, which Flannery has said would have three core segments: power, including renewable energy, aviation and health care.

GE shares (GE) were up 2.6% to $15.36 in early trading Monday, while Wabtec (WAB) shares rose 1.7% to $96.81.

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Follow USA TODAY reporter Mike Snider on Twitter: @MikeSnider.