Wabtec Acquires Majority Ownership of Faiveley Transport

Wabtec Corporation has announced the acquisition of majority ownership of Faiveley Transport S.A., a provider of systems and services for the railway industry, after purchasing the Faiveley family’s stake, which represented approximately 51 percent of the company’s shares outstanding. Wabtec acquired the family stake for approximately $212 million in cash and 6.3 million shares of Wabtec common stock. Prior to the acquisition, Faiveley Transport S.A. was a subsidiary of Faiveley Transport.

“The acquisition of Faiveley Transport is an excellent strategic fit, expanding our geographic presence, broadening our product and service capabilities, and strengthening our technology and innovation initiatives,” said Albert J. Neupaver, Wabtec executive chairman. “The combination of two rail industry leaders creates compelling growth opportunities and synergies, and strengthens the diversity of our revenue base. We’re pleased to welcome the Faiveley family as long-term Wabtec shareholders with representation on our Board of Directors.”

Wabtec is planning to launch a tender offer for the remaining public shares in December in which the public shareholders of Faiveley Transport will have the option to elect to receive €100 per share of Faiveley Transport in cash or 1.1538 Wabtec common shares per share of Faiveley Transport.

The total purchase price for 100 percent of the shares of Faiveley Transport is approximately $1.7 billion, including assumed debt and net of cash acquired. The $1.2 billion cash portion of the transaction will be funded from approximately $325 million of cash on hand, the net proceeds from a recent $750 million senior notes offering and the company’s existing revolving credit facility and term note.

The combination of Wabtec and Faiveley Transport will create a rail equipment company with revenues of approximately $4.2 billion and a presence in key transit and freight rail regions worldwide. Faiveley Transport has annual sales of approximately $1.2 billion. Wabtec expects to realize at least $50 million in annual pre-tax synergies from the combination by year three, and the transaction will be accretive to Wabtec’s earnings per diluted share in 2017.

Raymond T. Betler, Wabtec’s president and CEO, stated, “Our combination with Faiveley Transport brings Wabtec many complementary products, a strong presence in the European and Asia Pacific transit industries, and solid relationships with blue-chip, global customers.”

Faiveley Transport chairman of the management board and CEO Stéphane Rambaud-Measson has joined Wabtec as president and CEO of its Transit Group and as a corporate executive vice president, reporting to Betler. Philippe Alfroid and Erwan Faiveley were elected as new members of the Wabtec Board of Directors.

“Wabtec’s Transit Group, under the Faiveley Transport brand name, will pursue its objective to be a global leader in railway equipment and services,” remarked Rambaud-Measson. “The passenger transit business typically provides a steady flow of new projects and aftermarket growth opportunities, and we are well positioned in key global markets such as Europe and Asia Pacific.”

Including the effects of the acquisition, Wabtec updated its 2016 guidance with full-year revenues expected to be down approximately 10 percent to about $2.95 billion. Full-year, GAAP earnings per diluted share are expected to be between $3.45 to $3.50. The company expects to record restructuring and transaction-related costs of about $60 million pre-tax and a one-time effective tax rate adjustment for non-deductible transaction costs that will result in additional tax expense of about $10 million during 2016. These items equal about 50 cents per diluted share after-tax. Excluding the restructuring and transaction-related costs, and the tax-rate adjustment, Wabtec expects full-year adjusted earnings per diluted share to be between $3.95 to$4.00.

Wabtec provided preliminary information for the full year of 2017, which include the effects of the acquisition. Revenues are expected to be about $4.2 billion. Excluding restructuring and transaction-related costs, adjusted operating margin is expected to be about 15 to 16 percent, and adjusted earnings are expected to be about 8 percent higher than the company’s adjusted earnings in 2016. Wabtec will update this preliminary information when the company reports its 2016 results.