Rail equipment company Wabtec Corporation has agreed to merge with GE Transportation, a unit of General Electric Company that provides locomotives and rail services.

This $11bn deal has been approved by the boards of directors of Wabtec and GE.

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GE will receive $2.9bn in cash after the completion of the transaction. GE shareholders will own about 40.2% while GE will own 9.9% of the merged company and Wabtec shareholders will be entitled to 49.9%.

This deal is expected to be tax-free to the shareholders of the companies.

Valued at $9.1bn, Wabtec has 18,000 employees and generated about $3.9bn in revenue last year.

“We are confident that this transformational combination will create value for both Wabtec and GE shareholders, innovative solutions for our customers and new outlets for career growth for our employees.”

GE Transportation has around 9,000 employees and had revenues of around $4.2bn in 2017.

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The resulting company is expected to experience about $250m in annual synergies by 2022 and secure a tax benefit of about $1.1bn.

Rumours of a possible merger between the two companies started circulating earlier in April, when GE CEO John Flannery said he was planning to cut down its assets by around $20bn.

Flannery stated that the company would focus on three segments – power, aviation and healthcare. However, GE Transportation, which included locomotives, mining technology and marine engines, was not part of this core segment.

Wabtec CEO Raymond Betler said: “By bringing together our highly complementary strengths we are confident that this transformational combination will create value for both Wabtec and GE shareholders, innovative solutions for our customers and new outlets for long-term career growth for our employees.”

Betler will become president and CEO of the merged company.