William B. Cassidy, Senior Editor | Jul 23, 2012 10:19AM EDT
Genesee & Wyoming is buying RailAmerica in a $1.4 billion deal that would combine the two largest short-line and regional railroad operators in North America.
Following the transaction, GWI will own 111 railroads, 15,100 miles of track and 1,000 locomotives — with most of those operations in North America.
Currently, GWI owns or operates about 66 railroads, and RailAmerica, 45.
Jacksonville, Fla.-based RailAmerica reportedly has been on the block for several months. The company lost $40.2 million in the first quarter.
GWI's revenue rose to $207 million in the first quarter, as North American and European freight revenue increased 9 percent, but profit was nearly flat.
The merger will significantly diversify GWI’s holdings. After the deal closes, GWI expects to originate or terminate more than 4 percent of U.S. carload traffic.
“The transaction is transformational for our North American operations, as GWI will now operate 108 railroads (in North America),” said Jack Hellmann, president.
The Greenwich, Conn.-based holding company’s footprint will expand from 24 states to 37 states, strengthening service to shippers and Class I railroads, Hellmann said.
Post-merger, the U.S. will account for about 70 percent of GWI’s revenue, with Australia at 20 percent, Canada at 10 percent and Europe at less than 1 percent.
Jacksonville-based RailAmerica owns 45 railroads in the U.S. and Canada. RailAmerica is expected to add about $650 million in revenue to GWI’s topline.
If the transaction is approved by the federal Surface Transportation Board, the merger could give GWI a 10 percent earnings boost in 2013, the company said.
GWI will pay $27.50 per share for RailAmerica, while refinancing its own debt with $2 billion in new debt and $800 million in stock and equity-related securities.
GWI received $2.3 billion in committed debt financing from BofA Merrill Lynch and $800 million of committed equity financing from The Carlyle Group.
RailAmerica has been owned by Fortress Investment Group since 2007 and listed on the New York Stock Exchange since 2009.
Contact William B. Cassidy at wcassidy@joc.com. Follow him on Twitter at @wbcassidy_joc.