American short-line railroad holding company Genesee & Wyoming, Inc. (NYSE: GWR) announced that it has been acquired by infrastructure investment firms Brookfield Infrastructure (NYSE: BIP) and GIC in a deal valued at $8.4 billion.
The $112 per share offer represents a 12 percent premium to GWR’s last closing price and a 39.5 percent premium to its March 8 share price, the last trading price prior to media speculation.
“We believe this transaction is an excellent outcome for all GWR stakeholders. For our current stockholders, the sale price realizes significant value and represents a 39.5 percent premium to our March 8th share price. And for long-term investors who have owned our shares for the past two decades, the sale price represents a return of more than 5,400 percent,” said Jack Hellmann, the company’s Chairman and Chief Executive Officer.
Talks of a potential deal have been floating around since March 2019 when Bloomberg published an article on the takeout rumors. On its earnings call management said, “we don’t comment on market speculation or rumors,” when asked about the Bloomberg article.
GWR is a company of roll-ups and acquisitions and has been long-tied to private equity and energy infrastructure firms, bidding on potential acquisitions together and against each other. The company’s stock value has always been predicated on growth through acquisition, thereby increasing earnings and driving the stock price higher. GWR has bumped up against private equity investors on an ongoing basis as it is in the same market looking at the same targets. Many from the investment community would likely argue that this deal has been the goal all along – significant earnings growth through tuck-in acquisitions in hopes of realizing a large payday.
Brookfield Infrastructure will provide approximately $500 million, with the remainder being owned by Brookfield Infrastructure’s institutional partners and GIC. The deal is expected to close by year end or early 2020 assuming customary closing conditions are met and GWR’s shareholders provide a two-thirds approval.
The acquisition means GWR will become a privately held company and will no longer report monthly carloads and will not hold a second quarter 2019 earnings call.
“For our customers, employees and Class I partners, the long-term investment horizon of Brookfield Infrastructure and GIC as seasoned infrastructure investors is perfectly aligned with the long lives of GWR railroad assets, which are integral to the local economies that we serve in North America and around the world. They are also fully supportive of our business plan, which will continue to be focused on safety, customer service and growing our footprint to provide more opportunity for our people. We also expect this transaction will allow us to further enhance our business as we benefit from Brookfield Infrastructure/GIC’s expertise in real estate and technology, as well as relationships with their rail-centric/complementary portfolio companies,” said Hellmann.
GWR owns or leases 120 short-line railroads in North America, Europe and Australia. It provides service on more than 26,000 kilometers of track with approximately 8,000 employees.
Brookfield Infrastructure is part of Brookfield Asset Management, a global alternative asset manager with more than $365 billion in assets under management.
GIC is a global investment firm with the primary strategy of investing directly into operating assets with a high degree of cash flow visibility and provide an inflation hedge.