Wabtec (WAB) to Acquire Faiveley Transport in ~$1.8B Deal

Wabtec (NYSE: WAB) plans to acquire Faiveley Transport S.A., a leading global provider of value-added, integrated systems and services for the railway industry with annual sales of about $1.2 billion.

The transaction, which is subject to various conditions, including labor group consultations and other regulatory requirements, has been structured in three steps:

• Wabtec has made an irrevocable offer to the owners of approximately 51% of Faiveley Transport’s shares for a purchase price of €100 per share, payable 25% in cash and 75% in Wabtec preferred stock. The preferred stock will have a 1% annual dividend or, if greater, the dividend assuming full conversion into common shares, and must be converted after three years into Wabtec common shares at an implied ratio of one Faiveley Transport common share for 1.125 Wabtec common shares. Shareholders owning 51% of Faiveley Transport have entered into exclusive discussions with Wabtec.
• Upon completion of required labor group consultations, Wabtec expects that the 51% shareholders will enter into a definitive share purchase agreement and Faiveley Transport will enter into a transaction agreement with Wabtec.
• Upon completing the share purchase, Wabtec will commence a tender offer for the remaining publicly traded Faiveley Transport shares. The public shareholders will have the option to elect to receive €100 per share or Wabtec preferred stock. The preferred stock portion of the consideration is subject to a cap of 75% of Faiveley Transport’s common shares. Wabtec intends to delist Faiveley Transport from Euronext after the tender offer if minority interests represent less than 5%.

The total purchase price is about $1.8 billion, including assumed debt. Wabtec plans to fund the cash portion of the transaction with cash on hand, existing credit facilities and potentially other debt financing.

The strategic combination of Wabtec and Faiveley Transport will create one of the world’s largest public rail equipment companies, with revenues of about $4.5 billion and a presence in all key freight rail and passenger transit geographies worldwide. Wabtec expects to realize at least €40 million in annual pre-tax synergies from the combination, and the transaction is expected to be accretive to Wabtec’s earnings per diluted share in 2016.

Albert J. Neupaver, Wabtec’s executive chairman, said: “Faiveley Transport is an excellent strategic fit, expanding our geographic presence considerably, broadening our product and service capabilities, and enhancing our technology and innovation initiatives, all of which will make us a more efficient global competitor. We are excited by the compelling opportunities and synergies created from the combination of two rail industry leaders with historic ties, a commitment to growth and efficiency, and a focus on technology, quality and customer service. We would be pleased to welcome the Faiveley family as a long-term Wabtec shareholder with representation on our Board of Directors.”

Faiveley Transport’s headquarters in Gennevilliers, France will become Wabtec’s global transit headquarters, under the Faiveley Transport brand name. Wabtec also intends to maintain the existing Faiveley Transport human resources policy in Europe for a period of at least 18 months after closing and to complement the company’s existing Centers of Competencies for engineering and research and development, in line with Faiveley Transport’s 2018 Strategic Plan presented in May 2015.

Founded more than 90 years ago, Faiveley Transport has more than 5,700 employees in 24 countries and generated record sales of about $1.2 billion in its most recent fiscal year. In 2005, Faiveley Transport purchased SAB WABCO, a leading supplier of braking equipment formerly affiliated with Wabtec. Today, Faiveley Transport supplies railway manufacturers, operators and maintenance providers with a range of valued-added, technology-based systems and services in Energy & Comfort (air conditioning, power collectors and converters, and passenger information), Access & Mobility (passenger access systems and platform doors), and Brakes & Safety (braking systems and couplers).

Raymond T. Betler, Wabtec’s president and chief executive officer, said: “Faiveley Transport brings to Wabtec many complementary products, a strong presence in the European and Asian transit industries, and solid relationships with blue-chip, global customers. Together, we expect to strengthen our ability to help our customers improve their safety, productivity and efficiency. We look forward to working with the Faiveley Transport team to ensure a successful combination for all stakeholders.”

Upon completion of the transaction, Stéphane Rambaud-Measson, current chairman of the Management Board and chief executive officer of Faiveley Transport, will join Wabtec as president and chief executive officer of Wabtec’s Faiveley Transport group and as Wabtec corporate executive vice president, reporting to Betler.

Rambaud-Measson said: “The combination of our operations with Wabtec would be an excellent strategic move for Faiveley Transport. Our complementarity is remarkable, both in terms of product portfolios and geographies. This transaction would enable us to pursue our ambition to become a global leader in railway equipment and services for the passenger transit market. Faiveley Transport would double in size with the contribution of Wabtec’s transit division thus enlarging the French industrial footprint of the group. The strong commitment of the Faiveley family as long-term shareholders is a testimony of the powerful industrial rationale of the proposed combination.”

Wabtec Corporation, with more than 13,000 employees in more than 20 countries and annual sales of about $3.3 billion, is a global provider of value-added, technology-based products and services for freight rail, passenger transit and other industrial segments. The company manufactures a range of products for locomotives, freight cars and passenger transit vehicles, new switcher and commuter locomotives and provides aftermarket services.

UBS Investment Bank and DC Advisory are serving as financial advisors to Wabtec, and Jones Day is acting as legal advisor.

Investor Call

Wabtec will host a call with analysts and investors at 9:30 am, U.S. Eastern Time today. To listen, go to www.wabtec.com and click on the “Webcasts” tab in the “Investor Relations” section. To view a copy of the presentation that will be discussed during the call, click on the “Press Releases” tab under “Corporate Information” and click on the press release titled “Wabtec Plans To Acquire Faiveley Transport.” The presentation will be included at the end of the press release on the website.

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