(Reuters) – General Electric Co <GE.N> confirmed on Monday it was unloading the bulk of its transportation business which makes train engines to Wabtec Corp <WAB.N>, a U.S. manufacturer of equipment for the rail industry, in a deal valued at about $11.1 billion (8.3 billion pounds).
The deal, flagged to Reuters by sources who declined to be named on Sunday, is the biggest done by Chief Executive John Flannery since he announced a major overhaul of the U.S. industrial conglomerate late last year.
GE will receive a $2.9 billion up-front payment in cash and its shareholders will own 50.1 percent of the combined company, while Wabtec shareholders will own the rest, the companies said in a statement.
Wabtec chief executive Raymond T. Betler will remain president and CEO of the merged company while its Chairman, Albert J. Neupaver has been re-appointed executive chairman. GE Transportation Chief Executive Rafael Santana will become president and CEO of Wabtec’s Freight Segment.
The resulting company will have approximately $8 billion in revenues, the companies said.
The transaction is expected to close in early 2019.
Flannery told GE shareholders earlier this year he would be looking aggressively at spin-offs and other ways to maximize the value of GE’s power, aviation and healthcare units.
Based on Wabtec’s stock price on April 19, 2018, the last unaffected trading day prior to media speculation regarding a potential transaction, the value of the transaction is approximately $11.1 billion, the companies said.
When adjusted for the net tax step-up value of $1.1 billion accruing to the combined company, the transaction value is $10 billion. The transaction is expected to be tax free to the companies’ respective shareholders.
GE shares were up 2.1 percent at $15.30 in premarket trading, while Wabtec shares rose 1.4 percent to $96.51.
(Reporting by Rachit Vats in Bengaluru; editing by Patrick Graham)