Wabtec Corp. said on Thursday it had completed its acquisition of Faiveley Transport, creating one of the largest rail equipment companies in the world with annual revenues of $4.2 billion.
Wabtec gained control of the French company, a deal first proposed publicly in July 2015, by acquiring the Faiveley family’s 51 percent stake in the company. The Wilmerding company plans to launch a tender offer for the remaining public shares later this month and wrap that up in early 2017.
Wabtec said it’s spending a total of about $1.7 billion on the purchase.
The deal was long anticipated by Wabtec’s investors. In a call on Thursday, Wabtec executives characterized the deal as greatly expanding the company’s international opportunities, as demand for rail products and services booms in Europe, China, India and South Africa.
The combined company will have operations in more than 30 countries and sales in more than 100 countries, the company said.
Faiveley also boosts Wabtec’s transit business. Expected revenue from sales of buses, transit cars and other passenger rail equipment will make up 55 percent of the combined company, up from 38 percent of Wabtec’s business for the full year 2015.
The company’s financial performance over the last year has been dragged down by slumping sales in its freight business as railroads, hurt by the decline of commodities, pull back capital spending and hold off on improvements.
In fact, Wabtec revised the deal in October to make it more appetizing, allowing the Faiveley family the option to receive as much as 45 percent of the purchase in cash.
In the original deal announced in July 2015, the Faiveley family was to receive 25 percent of the purchase price in cash, while the rest would be paid in Wabtec stock valued at 100 euros a share, or roughly $109 a share.
In the terms disclosed Thursday, however, the family elected to receive 24 percent in cash.
Stephane Rambaud-Measson, Faiveley Transport’s chairman and CEO, will be president and CEO of Wabtec’s transit business. On the call with investors, Mr. Rambaud-Measson called Wabtec a “very famous rail industry leader” that has “very similar cultures and values.”
“I must say it took us quite some time, took us longer than expected, to accomplish this process, but I’m very, very happy to be where we are today,” he said.
Raymond T. Betler, Wabtec’s president and CEO, said the expansion to global markets was key. The deal results in “many complementary products,” and the vision “to internationalize this company continues to be realized, and really at an accelerated rate as a result of this acquisition.”
In updated guidance, Wabtec said it expects its annual revenues to fall by about 10 percent to around $3 billion in 2016. But next year, Wabtec forecasts annual revenue to rebound to $4.2 billion, with adjusted earnings about 8 percent higher than in 2016, excluding restructuring and transaction-related costs.
On news of the deal, Wabtec stock closed on Thursday at $86.04, up 1.6 percent.
Regarding the tender offer, Wabtec explained in a press release that Faiveley shareholders have the option to receive cash of 100 euros for each share of Faiveley or 1.1538 shares of Wabtec stock for every share of Faiveley.
Daniel Moore: dmoore@post-gazette.com, 412-263-2743 and Twitter @PGdanielmoore.
First Published: December 2, 2016, 5:00 a.m.