G&W to purchase Providence and Worcester

Regional and short line rail group Genesee & Wyoming Inc. has agreed to acquire Worcester, Mass.-based railway Providence and Worcester Railroad Co. for $126 million, according to a joint statement from the companies.    Genesee & Wyoming Inc. (G&W) has agreed to acquire Worcester, Mass.-based railway Providence and Worcester Railroad Co. (P&W) for $126 million, according to a joint statement from the companies.
   The regional and short line rail group will pay an all-cash consideration of $25 per share of common stock in P&W. The acquisition is expected to close in fourth quarter 2016, pending approval from shareholders and the relevant regulatory authorities.
   G&W said it will fund the purchase through its revolving credit facility, under which it had $542 million available as of June 30.
   P&W, which connects with G&W’s New England Central Railroad (NECR) and Connecticut Southern Railroad, operates over 163 miles of owned track and 350 miles under track access agreements in southeastern New England. The railroad also connects with CSX, Norfolk Southern Corp., Pan Am Railways, Pan Am Southern, the Housatonic Railroad, and the New York and Atlantic Railroad, as well as Canadian National and Canadian Pacific via NECR.
   In addition, the railway has exclusive freight access on Amtrak’s Northeast Corridor between New Haven, Conn., and Providence, R.I., and trackage rights on MTA Metro-North Railroad, Amtrak and CSX between New Haven, Conn., and Queens, N.Y.
   If the acquisition is approved by the U.S. Surface Transportation Board (STB), P&W and its 140 employees would be merged into G&W’s Northeast Region, led by Senior Vice President Dave Ebbrecht.
   “The addition of P&W to G&W’s existing presence in the region substantially enhances G&W’s ability to serve customers and Class I partners in New England, which is a highly competitive rail market with a premium placed on timely, efficient and safe rail service,” the companies said in a statement. “The acquisition is anticipated to unlock significant cost savings through overhead, operational and long-term network efficiencies as well as to generate significant new commercial opportunities.”
   P&W serves a diverse mix of aggregates, auto, chemicals, metals, and lumber customers in the region, handling approximately 43,000 carloads and intermodal units annually. The railroad also serves the ports of Providence, Davisville and New Haven, as well as a U.S. Customs bonded intermodal terminal in Worcester, Mass. that receives inbound intermodal containers for distribution in New England.
   Under the terms of the agreement, G&W expects to divest 45 acres of undeveloped waterfront land in East Providence, R.I. currently owned by P&W that was initially created as a deepwater rail-served port.
   “The acquisition of P&W is an excellent strategic fit with G&W’s contiguous railroads, the New England Central and the Connecticut Southern,” G&W President and CEO Jack Hellmann said of the deal. “Following anticipated STB approval of the acquisition, our connectivity with the P&W enables us to realize substantial immediate cost savings, to share and optimize the utilization of equipment and other assets, and to unlock significant new customer opportunities across sister G&W railroads as well as connecting partners at two Canadian Class I Railroads, two U.S. Class I Railroads and two regional railroads. Our acquisition of the P&W will ultimately enhance the efficiency and customer service of rail in New England.”
   G&W projects P&W will generate approximately $35 million in revenues and earnings before interest, taxes, debt and amortization (EBITDA) of $12 million, including $8 million in immediate overhead and operational cost savings. In the medium term, the company anticipates additional operational efficiencies and commercial opportunities will generate an addition $5 million in EBITDA over the following two to three years.
   The Darien, Conn.-based operator earlier this month reported net income of $48.4 million on $501.4 million in revenues for second quarter 2016, year-over-year decreases of 8.3 percent and 7.5 percent, respectively.