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Wabtec (WAB) Signs Revised Deal With GE, Gets Majority Stake

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The much-awaited deal between GE Transportation, a unit of General Electric Company (GE - Free Report) , and Westinghouse Air Brake Technologies Corporation (WAB - Free Report) — popularly known as Wabtec — is anticipated to close by Feb 28.  The closure of review by the U.S. Department of Justice (DOJ), earlier in January, marked a significant development toward the completion of the multi-billion dollar deal that was announced in May 2018.

In another development pertaining to the deal, the companies restructured the same. Per the revised terms, Wabtec shareholders will own roughly 50.8% of the combined entity following closure of the transaction. The previous terms had granted them minority stake (49.9%). As a result, General Electric shareholders will now have a stake of 49.2% in the combined entity — of which roughly 24.3% interest will be with General Electric’s shareholders and 24.9% will be with General Electric. According to the earlier terms, General Electric’s shareholders were to get 40.2% with 9.9% going to GE.

Moreover, under the modified structure Wabtec will issue 3.3 million fewer shares than planned originally. Following the revision, the transaction will be considered a taxable dividend for U.S. federal income tax purposes. However, General Electric shareholders will continue to receive $2.9 billion in cash following completion of the deal.

The inclusion of GE Transportation offerings will significantly broaden Wabtec’s product portfolio. The combined entity is anticipated to generate $8 billion in revenues. Wabtec intends to unveil its fourth-quarter 2018 results after the deal materializes. It will issue current-year financial guidance for the combined entity at that time.

Zacks Rank & Key Pick

Wabtec carries a Zacks Rank #3 (Hold). Few better-ranked stocks in the Zacks Transportation sector are Spirit Airlines (SAVE - Free Report) and Air Lease Corporation (AL - Free Report) . While Spirit Airlines sports a Zacks Rank #1 (Strong Buy), Air Lease carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Spirit Airlines and Air Lease have an expected EPS growth rate (three to five years) of 27.3% and 8.5%, respectively.

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