Reuters – Genesee & Wyoming Will Pay $1.39B for RailAmerica

Genesee & Wyoming Inc. said it will buy rival RailAmerica Inc. for $1.39 billion in cash to create one of the biggest regional railroad operators in the United States. The combined companies will originate or terminate more than 4 percent of all carload traffic in the United States, Genesee said. They will have 111 railroads and 15,100 miles of track, and annual revenue of more than $1.4 billion, Reuters wrote. RailAmerica is 60% owned by Fortress Investment Group. Fortress bought RailAmerica in 2007 and took it public in 2009.

(Reuters) – Genesee & Wyoming Inc said it will buy rival RailAmerica Inc for $1.39 billion in cash to create one of the biggest regional railroad operators in the United States.

 

The combined companies will originate or terminate more than 4 percent of all carload traffic in the United States, Genesee said. They will have 111 railroads and 15,100 miles of track, and annual revenue of more than $1.4 billion.

 

“This footprint not only provides us with strong leverage to any eventual recovery of the U.S. economy but also creates a powerful platform for future industrial development along railroads in the 37 U.S. states in which we will do business,” Genesee CEO Jack Hellmann said in a statement.

 

Genesee offered $27.50 per share for RailAmerica – a premium of about 11 percent to the stock’s Friday close.

 

The company plans to fund the acquisition and a simultaneous refinancing of its debt with $2 billion of new debt and $800 million of equity or equity-linked securities.

 

It said it has received $2.3 billion of committed debt financing from BofA Merrill Lynch and $800 million of committed equity financing from private equity firm Carlyle Group.

 

RailAmerica said in May it was considering a potential sale of the company and had begun preliminary talks with third parties.

 

Watco Cos LLC, several infrastructure funds and some Canadian pension funds were evaluating bids for RailAmerica, Reuters had reported earlier this month. [ID: nL2E8I2CEC]

 

Jacksonville, Florida-based RailAmerica generated revenue of $551.1 million in 2011. Genesee had revenue of $829.1 million in the same year.

 

RailAmerica is 60 percent owned by Fortress Investment Group . Fortress bought RailAmerica in 2007 and took it public in 2009.

 

BofA Merrill Lynch served as financial advisers to Genesee, while RailAmerica was advised by Deutsche Bank Securities.

 

The deal is subject to approval from United States Surface Transportation Board. If the deal is approved by the end of the year, it will increase Genesee’s earnings per share by more than 10 percent in 2013, the companies said.