Wabtec higher on potential GE Transportation deal

Wabtec rises as analyst says buy on potential GE Transportation deal

Wabtec higher on potential GE Transportation deal, Stockwinners
Wabtec higher on potential GE Transportation deal, Stockwinners

Shares of Wabtec (WAB) are on the rise after Stifel analyst Michael Baudendistel upgraded the stock to Buy following a media report saying the company was in discussions to acquire GE Transportation from General Electric (GE).

Also commenting on the deal, Stephens analyst Justin Long told investors the transaction could be a significant catalyst for Wabtec.

POTENTIAL GE TRANSPORTATION SALE

On Friday, Bloomberg reported that General Electric was in talks to sell its century-old locomotive business to rail-equipment maker Wabtec.

The transportation unit could be worth as much as $6.8B in a sale, the report noted, adding that a deal has not been reached and talks may still fall apart. GE may also pursue an initial public offering or other strategic option for the business, sources said.

BUY WABTEC

In a research note to investors, Stifel’s Baudendistel upgraded Wabtec to Buy from Hold, while raising his price target on the stock to $99 from $75, citing Bloomberg’s report on a potential acquisition of GE Transportation.

While acknowledging that a standalone IPO or an acquisition by a machinery company are also possibilities, the analyst argued that a deal would be transformative for Wabtec.

Further, Baudendistel pointed out that he believes there is strategic rationale for the deal and the possibility improves his perspective on the reward-to-risk ratio for the shares. Wabtec would be buying the business at a cyclical low point, he contended.

Additionally, the analyst noted that Wabtec’s recent results have improved on growth in the aftermarket revenue, an area that held back 2017 results.

‘SIGNIFICANT’ CATALYST FOR WABTEC

Meanwhile, Stephens’ Long told investors in a research of his own this morning that he is “a bit surprised” by the news given the potential size of the transaction, which he estimates to be around $8B.

That said, the analyst noted he thinks it would be a “great strategic fit” primarily due to GE Transportation’s services business that features technologically advanced rail-related products.

Additionally, Long believes the deal could be “highly accretive” to Wabtec earnings per share, with his “best guess” putting the deal probability at over 50%. The analyst reiterated an Overweight rating on Wabtec’s shares.

PRICE ACTION

In Monday’s trading, shares of Wabtec have gained almost 2% to $88.98, while General Electric’s stock has advanced about 1% to $14.62.


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Vectren Corporation sold for $72 a share

Vectren investors to receive $72/share cash for each share in CenterPoint deal

Vectren Corporation sold for $72 a share, Stockwinners
Vectren Corporation sold for $72 a share

CenterPoint Energy (CNP) and Vectren Corporation (VVC) announced they have entered into a definitive merger agreement to form an energy delivery, infrastructure and services company serving more than 7 million customers across the United States.

Under the terms of the agreement, which have been unanimously approved by both CenterPoint Energy’s and Vectren’s Boards of Directors, Vectren shareholders will receive $72.00 in cash for each share of Vectren common stock.

CenterPoint Energy will also assume all outstanding Vectren net debt.

Vectren Corporation sold for $72 a share, Stockwinners
Vectren Corporation sold for $72 a share, 

The combined company is expected to have electric and natural gas delivery operations in eight states with assets totaling $29 billion and an enterprise value of $27 billion.

With the merger, CenterPoint Energy expects to maintain an annual guidance basis EPS growth target of 5 to 7 percent in 2019 and 2020, excluding any one-time charges related to the merger.

At the closing of the transaction, Scott M. Prochazka will serve as president and CEO of the combined company.

The full executive team for the combined company will be announced prior to or in conjunction with the closing of the merger.

The natural gas utilities operations of the combined company, as well as that businesses’ lead executive, will be headquartered in Evansville.

Additionally, CenterPoint Energy will establish a chief business officer for Vectren’s electric business who will directly report to CenterPoint Energy’s CEO and spearhead southwestern Indiana’s electric grid modernization and generation transition initiatives recently underway.

In addition to utility field employees, CenterPoint Energy will retain key operational activities in support of the utilities in Evansville.

Pursuant to the merger agreement, CenterPoint Energy will contribute an additional $3 million per year for a minimum of five years after the closing of the merger to the Vectren Foundation, which will continue to operate out of Evansville.

The closing of the transaction is subject to Vectren shareholder approval, approvals from the Federal Energy Regulatory Commission and Federal Communications Commission, and expiration or termination of the Hart-Scott-Rodino waiting period.

In addition to these conditions, the company will make certain regulatory filings in Indiana and Ohio. Subject to these conditions, the merger is expected to close by the first quarter 2019. Until the closing, CenterPoint Energy and Vectren will remain separate companies.


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