General Electric (GE) is making progress to reduce the complexity of the business and raise much needed cash in the process. The company announced that it is merging its transportation business with pure-play Wabtec (WAB) in order to create a giant in rail equipment, services, and software.
The deal makes sense for both businesses, mainly as a quarter of a billion in synergies are being projected. I like the deal although much good news has already been priced in. While GE stresses the high price received for the assets, I fail to see how this helps GE to deleverage a great deal as much of the proceeds will directly go to GE shareholders who are granted a direct share in Wabtec, thereby not solving a lot of financial headaches for GE, despite a near three billion one-time payment.
