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Under the deal, which had been rumored for several weeks, GE Transportation and Wabtec will be spun off into a separate company, with GE and its shareholders owning 50.1 percent and Wabtec shareholders controlling the remaining 49.9 percent.

Wabtec chief executive Raymond T. Betler will continue as president and CEO of the merged company while Wabtec Chairman Albert J. Neupaver has been re-appointed as executive chairman.

GE Transportation generated $3.7 billion in revenue a year ago but did not fit into CEO John Flannery's strategy of focusing on three core segments: power, including renewable energy, aviation, and health care.

The resulting company will have approximately United States dollars 8 billion in revenues, the companies said.

When adjusted for the net tax step-up value of $1.1 billion accruing to the combined company, the transaction value is $10 billion. GE shareholders will hold a 40.2 percent stake and GE will own 9.9 percent.

General Electric Company (NYSE:GE) chief executive John Flannery has indicated that he's open for business when it comes to turning around the struggling business, and he's just provided an emphatic confirmation of that.

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Both companies say they expect "to benefit from the cyclical tailwinds they are experiencing as industry conditions improve".

A Reverse Morris Trust transaction allows a company to avoid a big tax bill by spinning off a unit that it wants to divest and simultaneously merging it with another company. "The backlog of approximately $18 billion includes about 1,800 new locomotives and approximately 1,000 to be modernized".

"GE Manufacturing Solutions is well positioned", GE said in statement.

As part of the restructuring plan announced late a year ago, GE is aiming to divest at least $20 billion of assets through sales, spin-offs or other means.

Wabtec reported a strong first quarter and is forecasting growth for the year. "Our two companies have more than 250 years of rail industry heritage, and our shared focus on safety, reliability, quality and customer relationships will enable a smooth integration". "Together, we can expand our global reach, strengthen our market capabilities and lead digital innovation across the transportation industry". The deal value, however, could be announced as early as this week, the sources said, asking not to be identified because the negotiations are confidential.