The end result will be a more vertically integrated freight car business that is… Read More » Wabtec Corp. (NYSE: WAB) and General Electric's (NYSE: GE) anticipated merger will likely close by the end of February 2019, and terms of the agreement have … So if you are a GE shareholder, you should have a keen interest in the rationale for the deal because you will be owning stock in Wabtec.`Receives 9.9% of shares in new Wabtec and $2.9 billion in cash.Second, it's worth noting that Wabtec is merging with GE Transportation at a cyclical low point. Meanwhile, the structure of the deal is a nice way to return capital to GE shareholders.Let's take a look at both sides of the story.Management has already told investors to expect earnings and, by implication, cash flow to be at the lower end of 2018 guidance -- its most recent guidance implies a $500 million cut in power segment profit, which will be hard to make up elsewhere.Since GE Transportation is only expected to start to rebound from a cyclical low in 2018, even the EV/EBITDA multiple for 2019 is still likely to reflect cyclically low earnings.
If not, it would represent a missed opportunity to possibly bring in some more much-needed cash.
Investors and security holders will also be able to obtain free copies of the documents filed by GE, Wabtec and/or SpinCo with the SEC from the … For example, GE Transportation is expected to deliver around 300 locomotives in 2018; that compares with an average of around 670 over the last decade.Wabtec's management certainly thinks it got a great deal. USA: The merger of Wabtec Corp and GE Transportation was completed on February 25, with Wabtec President & CEO Raymond T Betler describing the transaction as a ‘once-in-a-lifetime opportunity to bring together nearly four centuries of collective experience to create a technologically advanced leader with a highly complementary set of capabilities to move and improve the world.’ GE said that it would merge the division with Wabtec Corporation, based in Wilmerding, Pennsylvania, in a deal valued at approximately $11.1 billion. In a sense, GE is covering its 2018 dividend by borrowing money and relying on asset sales. Explore a career with us.Creating the energy technologies of the future and improving the power networks that we depend on today.Explore the latest stories, news, downloads, and press tools.Commercializing GE’s technology and IP to accelerate growth and achieve market differentiation.Voices is a network for GE’s US supporters interested in the company’s impact in their communities and in issues that impact the company.We connect capital to infrastructure and deliver innovative financial solutions that help make the world work better.Access GE’s recent and historic Annual Reports and accompanying materials.Contact information for general inquiries and feedback.Offering a suite of products to help unlock the full potential of additive manufacturing.We build intelligent devices, data analytics, applications and services to enable healthcare practitioners to deliver care more efficiently and with better outcomes.Discover how our people & technology are solving global issues, improving lives, and changing industries.By embracing diverse teams and perspectives, we are better equipped to build a world that works.Tune in or catch up on GE’s latest investor events and reports.Read the latest GE financial news releases and stories.Our technology, global network, and exceptional team is fueled by a mission—building a world that works.Explore a timeline of GE technologies that have spurred transformation across the world.A culture of integrity, compliance, safety, and respect for human rights, while reducing our environmental footprint.Get in touch and stay informed.GE Aviation is a world-leading provider of aircraft engines, systems and avionics.Access the latest press releases, media contacts, and press tools.GE's dedicated team, leading technology, and global reach and capabilities help the world work more efficiently, reliably, and safely.Transforming how industry solves its toughest challenges by bringing simplicity, speed and scale to digital transformation.GE's innovation engine where ideas become reality to create a better world and deliver differentiated tech across the company's industrial portfolio.Find yourself a world changing job.Learn more about our culture, businesses, and life at GE. Although this figure is lower than the 5% many analysts assume for mergers, there are a couple of things to consider that suggest Wabtec is onto a good thing.An analyst with a more pessimistic approach would worry about continued deterioration in the power segment and therefore see the cash from Wabtec as small potatoes compared to what GE could need to realize its restructuring plans while maintaining its current dividend.GE has decided to merge GE Transportation with Wabtec. In other words, in future years, earnings should rebound strongly -- and, all things being equal, the EV/EBITDA multiple will decline.Retains 49.9% of shares in new Wabtec.As it stands, GE expects $6 billion to $7 billion in industrial FCF in 2018, which is intended to fund a $4.2 billion dividend payment. Data source: Wabtec presentations.All told, it looks like a good deal for Wabtec.An analyst with a glass-half-full approach would see the deal as progress on GE's restructuring plans and note that the cash flow will give the company more leeway to restructure the power segment before a bounce-back in total FCF generation in 2019.
Aside from the tax benefit, the merged company is expected to generate $250 million in run-rate synergies by the fourth year after the deal, or around 3.2% of the combined 2017 revenue of GE Transportation and Wabtec. Specifically, GE Transportation will be first distributed to GE shareholders in a "tax-free spin- or split-off; then immediately merged with Wabtec," according to the deal presentation.
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