Shareholders of General Electric (NYSE:GE) should rejoice. On May 21st, the management team at the conglomerate announced that it had reached an agreement with Westinghouse Air Brake Technologies (NYSE:WAB), also known as Wabtec, wherein it will be combining its Transportation segment with the firm in a multi-billion dollar transaction. This move implies a significant value for the segment, which management now believes will see meaningful growth in the next couple of years, and gives investors some insight into what kind of value-creating opportunities exist within the firm.
A look at the transaction
Earlier this year, I wrote an article where I attempted to place a value on General Electric’s Industrial operations. In that piece, I made the case that the firm’s Transportation segment (which you can read more about here) was likely worth somewhere around $8.24 billion. The valuation, though seemingly high in some respects, was based on my thinking that the locomotive industry had reached or was nearing its trough and would see some recovery in the future.
