RailAmerica Prices IPO

NEW YORK (Reuters) – RailAmerica Inc (RA.N), which owns and operates short line and regional freight railroads in North America, priced shares for $15 each in its initial public offering, falling short of expectations, but the company sold 1 million shares more than expected, an underwriter said.

RailAmerica, which is owned by private equity funds managed by a unit of Fortress Investment Group LLC (FIG.N), sold 22 million shares, which it had estimated would price for between $16 and $18 each. The IPO raised $330 million.

About half of the shares in the IPO were sold by the Fortress funds.

RailAmerica shares will start trade on Tuesday on the New York Stock Exchange under the symbol “RA,” marking the company’s return to the Big Board following a $1.1 billion buyout by the Fortress-run funds in February 2007.

Fortress will still own more than half of RailAmerica’s common shares after the IPO. The 1 million extra shares sold were held by the Fortress fund, which offered 52.3 percent of the shares in the IPO.

The underwriters, led by JP Morgan, Citi, Deutsche Bank Securities and Morgan Stanley, have the option to buy 3.3 million additional shares.

RailAmerica plans to use the net proceeds of about $150 million mostly to pay down debt.

In the first half of 2009, RailAmerica had sales of $206.4 million, down 19 percent from the year-earlier period, while profit rose fourfold to $19.2 million over the same period.

Its customers include chemicals, coal and food companies. Even though short line railways have contended with less demand during the recession, their stocks have appreciated markedly in the past seven months. RailAmerica rival Genesee & Wyoming Inc (GWR.N) is up 93 percent since March lows.

(Reporting by Phil Wahba, editing by Matthew Lewis)