General Electric Co. will merge its transportation unit with rail equipment maker Wabtec Corp. in a deal valued at approximately $11.1 billion.
GE will receive $2.9 billion in cash at closing, with the company and its shareholders receiving a 50.1% stake in the combined company and Wabtec shareholders taking the rest, according to a joint statement released May 21.
The combination will make Wabtec a Fortune 500, global transportation leader in rail equipment, software and services with operations in more than 50 countries.
GE Transportation's adjusted EBITDA is estimated to grow 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.
The combined company is expected to have an annual double-digit EPS growth rate and total run-rate synergies of about $250 million, which is estimated to be achieved by 2022.
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.
The deal value is based on Wabtec's stock price April 19, the last unaffected trading day before media speculation regarding a potential transaction. When adjusted for the net tax benefit of $1.1 billion accruing to the combined company, the transaction value is $10 billion.
The deal is expected to close in early 2019, subject to customary closing conditions and approval by regulators and Wabtec shareholders.
Earlier, Reuters reported that GE was nearing a deal to merge GE Transportation with Wabtec. GE shares were up about 2% as of 9:32 a.m. ET.