GE Transportation, Wabtec to Merge

Wabtec has agreed to acquire GE Transportation in a transaction valued at $11.1 billion, which includes a $1.1 billion net tax benefit.

The merger will make GE Transportation a wholly-owned subsidiary of Wabtec, which is headquartered in Wilmerding, Pennsylvania.

Wabtec will become a Fortune 500 company with revenues of more than $8 billion. The combined company is expected to have 27,000 employees.

It is not clear what effect the merger will have on the Erie locomotive assembly plant where production of new locomotives is winding down as the facility transitions to an as-yet unspecified new role.

A spokesman for the union that represents workers at the facility in Lawrence Park expressed hope that Wabtec would reverse that decision.

GE Transportation also has engine plants in Grove City, Pennsylvania.

Wabtec, which got its start as Westinghouse Air Brake and is now formally known as Westinghouse Air Brake Technologies Corporation, will become a major player in the global railway equipment and services market with operations in more than 50 countries.

General Electric and Wabtec said in a statement on Monday that they expect synergies of around $250 million by 2022.

The merged company will operate as Wabtec and more than 23,000 locomotives in its global installed base and components on virtually all North American locomotives and freight cars.

GE is to receive at the closing of the deal $2.9 billion in cash for a 9.9 percent stake in the new company, while its shareholders will receive a 50.1 percent stake. Wabtec shareholders will hold the remaining 49.9 percent stake.

Wabtec Chairman Albert Neupaver will be the executive chairman of the merged company with Raymond Betler serving as president and CEO.

The company will have its headquarters in Wilmerding, which is a Pittsburgh suburb. GE Transportation is currently headquartered in Chicago.

GE Transportation President Rafael Santana will become president and CEO of Wabtec’s freight division, which will be based in Chicago.

Wabtec Chief Operating Officer Stephane Rambaud-Measson will become president and CEO of Wabtec’s transit segment, which is based in Paris.

GE will designate for nomination three independent board members.

The locomotive assembly business is prone to cyclical swings, but GE Transportation’s earnings before interest, taxes and depreciation is expected to grow from about $750 million this year to between $900 million and $1 billion in 2019.

The company has a backlog of about $18 billion including about 1,800 new locomotives and another 1,000 units to be rebuilt and upgraded.

In the past two quarters, GE Transportation has received orders worth $3.6 billion.

The merger is not expected to be completed until early 2019 and is subject to approval by the U.S. Securities and Exchange Commission.

GE Transportation spokeswoman Deia Campanelli said the GE Transportation name is expected to continue in some fashion, but those details have not been worked out.

Scott Slawson, president of Local 506 of the United Electrical, Radio and Machines Workers of America, which represents about 1,500 employees at the GE Transportation plant in Erie, told the Erie Times-News that there remain many matters for the union to work through between the time the deal closes and when the union’s contract expires in June 2019.

“If Wabtec is going to be a new employer to us, there are a lot of benefits to employees that we currently have with GE,” he said. “We have to bargain those things away from GE and make sure everyone gets what is in the contract. There is never anything easy. It means a lot of work. You have to be on your toes.”

However, Slawson said he is trying to see the merger as a positive. “At this point we have no reason to look at this any differently.”

GE Transportation said in summer 2017 that it planned to phase out production of new locomotives in Erie by the end of 2018.

The company has a newer and non-union assembly plant in Fort Worth, Texas, that is expected to continue building new locomotives.

“I think a fresh set of eyes might look at things differently,” Slawson said. “Mistakes are made. Hopefully our new employer is willing to listen.”

Slawson told Trains magazine that perhaps a Pennsylvania-based company might be willing to return some work to the Erie plant.

Raymond E. Grabowski, the president of the Lake Shore Historical Society in North East, Pennsylvania, said his group’s museum might be able to incorporate into its exhibits the technological advances made by Wabtec.

“One day, we hope we can look back and tell future generations that these too were proudly developed and made in Erie.,” he told Trains.

Tags: GE Transportation, GE Transportation Erie locomotive plant, GE Transportation Fort Worth plant, GE Transportation Grove City Engine Plant, mergers, Wabtec Corp