Acquisition of short line railroad Genesee & Wyoming completed

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.