The recent restructuring of the deal provides GE with more cash, but it also left GE as the minority owner of the combined entity. As a result, the merger is no longer structured as a Reverse Morris Trust and instead will be taxable to GE shareholders. Ultimately, GE agreed to unwind its ownership in the combined company (subject to certain limitations) over the next three years, but not in the 30 days immediately post close.
The date of record for the transaction is February 14th and GE shareholders as of that date will receive ~0.005403 shares of Wabtec for each GE common share owned. That means a shareholder with 10,000 GE shares will walk away with only 54 shares of WAB along with a little cash. Small shareholders will likely receive just cash in lieu of fractional shares and the odd exchange ratio could create orphaned positions and a period of forced selling.
Additionally, a when issued market is expected to begin trading on or about February 14th. This will offer shareholders a chance to sell their GE shares but retain their Wabtec interests or alternatively sell their Wabtec interest and retain their GE shares. The respective NYSE tickers will be ‘GE WI’ and ‘WAB WI’.
As of this writing, there have been no discussion of index changes related to this transaction. Wabtec is currently in the S&P Midcap 400 index, but it’s current pre-merger market cap is already above many S&P 500 constituents. I am certainly no expert in how index membership decisions are made, but it’s worth watching. We will keep you updated if there is a change.
Disclosure: Author holds no position in any stock mentioned.