• ITVI.USA
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  • OTRI.USA
    16.720
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  • OTVI.USA
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  • TLT.USA
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  • TSTOPVRPM.ATLPHL
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  • TSTOPVRPM.CHIATL
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  • TSTOPVRPM.LAXDAL
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  • TSTOPVRPM.PHLCHI
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  • TSTOPVRPM.LAXSEA
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  • WAIT.USA
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  • ITVI.USA
    12,455.160
    -61.590
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  • OTRI.USA
    16.720
    0.070
    0.4%
  • OTVI.USA
    12,431.370
    -62.290
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  • TLT.USA
    2.600
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  • TSTOPVRPM.ATLPHL
    2.500
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  • TSTOPVRPM.CHIATL
    2.020
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  • TSTOPVRPM.DALLAX
    1.290
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  • TSTOPVRPM.LAXDAL
    2.330
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  • TSTOPVRPM.PHLCHI
    1.400
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  • TSTOPVRPM.LAXSEA
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  • WAIT.USA
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NewsRail

Acquisition of short line railroad Genesee & Wyoming completed

Genesee & Wyoming, Inc. (NYSE: GWR) announced that the sale of the company to affiliates of infrastructure asset management firms Brookfield Infrastructure (NYSE: BIP) and GIC has been completed.

The deal results in each share of GWR common stock converted into a right to receive $112 in cash. The stock ceased trading on the NYSE prior to today’s session with a final closing price of $111.88.

“This transaction is an excellent outcome for all G&W stakeholders. For our customers, employees and Class I partners, the long-term investment horizon of Brookfield and GIC is perfectly aligned with the long lives of G&W railroad assets. We look forward to building on G&W’s track record of safety, service excellence and commercial growth as we become an important component of a portfolio of global infrastructure assets,” said G&W’s CEO Jack Hellmann.

G&W has a long history with private equity and energy infrastructure firms. The company has leveraged its investment partners to bid on potential acquisitions in the past.

The Darien, Connecticut-based short line rail operator amassed a large portfolio of short line and regional freight railroads through bolt-on acquisitions since its initial public offering in 1996. Some of the larger deals included a nearly $300 million deal for Australian railroad FreightLink in 2010, the $1.4 billion acquisition of its Jacksonville-based competitor RailAmerica in 2012 and a more than $750 million deal for U.K.-based Freightliner in 2015.

Historically, G&W’s stock price was predicated on potential growth through future acquisitions. In the United States, short line railroads typically operate short distances of track, interchanging freight with the larger Class I railroads or providing service into and out of industrial facilities. Serving one customer or facility in a limited capacity makes incremental revenue growth difficult, thus the need to increase revenue, earnings and consequently stock valuation through acquisitions.

Short line M&A activity to continue

Many in the investment community operated under the thesis that after decades of accumulating stand-alone short line railroads, G&W would be acquired at a significant premium. The $8.4 billion takeout of G&W (announced on July 1), represented a 40% premium to the share price at the time.

G&W has roughly 8,000 employees and operates 119 freight railroads and 16,000 track-miles throughout North America, Europe and Australia. The operator provides interchange service to the Class I railroads in the U.S. and direct transport to/from industrial facilities of bulk commodities like coal, minerals, lumber, chemicals and agricultural products, as well as intermodal traffic. G&W moves more than three million carloads annually.

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Todd Maiden

Based in Richmond, VA, Todd is the finance editor at FreightWaves. Prior to joining FreightWaves, he covered the TLs, LTLs, railroads and brokers for RBC Capital Markets and BB&T Capital Markets. Todd began his career in banking and finance before moving over to transportation equity research where he provided stock recommendations for publicly traded transportation companies.
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