USA: Wabtec Corp and GE Transportation announced a modification to the terms of their merger agreement on January 25. The transaction is expected to close by the end of February, subject to the satisfaction or waiver of customary closing conditions.
Under the modified arrangement, GE will complete the spin-off of a portion of GE Transportation to GE shareholders and immediately thereafter merge GE Transportation into a wholly owned subsidiary of Wabtec. Upon closing, Wabtec shareholders will own 50·8% of Wabtec on a fully diluted basis, compared to 49·9% under the previous terms. GE shareholders will directly own approximately 24·3% of Wabtec on a fully diluted basis, while GE will own common stock and non-voting convertible preferred stock which together represent approximately a 24·9% economic interest in Wabtec on a fully diluted basis, up from the 9·9% stake that GE would have owned under the transaction terms originally announced. GE will also receive approximately $2·9bn in cash at closing, as announced in May. In aggregate, Wabtec will issue 3·3 million fewer shares than originally contemplated.
GE will sell down its interest in Wabtec subject to certain staggered lock-up provisions and size constraints designed to facilitate an orderly disposition of its shares. The GE interest is valued at $3·4bn based on Wabtec’s current market stock price of $71·03. No sales can be made for 30 days post-closing, but GE must complete all sales before the third anniversary of the merger closing, subject to limited exceptions for market conditions.
‘Today’s announcement is a significant milestone in GE’s portfolio transformation’, said GE Chairman & CEO H Lawrence Culp Jr. ‘With the increase in GE’s stake in Wabtec, and increased proceeds as we sell down this stake, this transaction will further strengthen our balance sheet and support our de-leveraging plan. The combined business will be better positioned with an improved business mix and enhanced opportunities for faster innovation in key growth areas.’