General Electric announced recently that it’s planning to merge its transportation unit with Wabtec in $11.1 billion deal. Wabtec, a leading rail equipment manufacturing company based in the US plans to acquire GE transportation unit as part of its long-term expansion strategy. The deal is expected to close at the beginning of 2019 subject to fulfilment of all requirements.
The terms of agreement indicates that the GE and its shareholders will obtain 50.1% of the joint company, while the rest will remain for Wabtec and its shareholders. In addition, GE will first obtain $2.9 billion up-front cash payment and 9.9% stake once the combined firm starts functioning.
A Focus On Key Businesses
GE’s transportation unit has been facing challenges in the recent past and the management and its shareholders have opted to sell it off to raise some cash for other operational activities of the company.
GE plans to focus on three core business entities, that is, power, aviation and healthcare. Hence, the company has made a list to rid of about $20 billion of asset including sales, spin-offs and much more to turn the business around.
GE announced to get rid of its transportation business last year as it plans to streamline internal operations to eliminate more problems for the company. Last year the unit faced a huge slump in revenues and it’s currently focused on cutting down costs and refocusing other lucrative businesses. Such as manufacturing freight and passenger trains, mining equipment, marine diesel engines and much more.
A Great Business Opportunity For Wabtec
Wabtec manufactures equipment for a wide range of transportation service including the passenger transit vehicles, locomotives and freight cars. Wabtec expects to use the offer to double its annual revenue by expanding its freight locomotives and rail equipment to Fort Worth region.
GE opened the transportation plant at Fort Worth in 2013 with the intention of creating more than 700 job opportunities. But the company later laid off most of its workers after the demand for locomotives declined gradually. Hence, Wabtec is expected to revive hopes for residents by employing them.
Last year, the shareholders of GE expressed their concerns about the future of the locomotive plant but according to the company’s spokesman, the facility is well-positioned with manufacturing solutions and there’s a great chance to increase the production volume of locomotive and mining equipment.