RailAmerica to acquire three Alabama railroads

RailAmerica, Inc. has signed an agreement to acquire the assets of three short-line freight railroads in the state of Alabama for a total purchase price of $12.7 million. The transaction is expected to close in the second quarter of 2011 and is subject to customary closing conditions including regulatory approvals. The three railroads, known individually as the Three Notch Railroad (THNR), the Wiregrass Central Railroad (WGCR) and the Conecuh Valley Railroad (COEH), are currently owned by affiliates of Gulf and Ohio Railways, Inc. The Three Notch Railroad includes 35 miles of track connecting Georgiana and Andalusia, Ala.; the Wiregrass Central Railroad is a 20-mile railroad that runs between Waterford and Enterprise, Ala.; and the Conecuh Valley Railroad is a 15-mile railroad linking Troy and Goshen, Ala. Each of the three lines interchanges with CSX Transportation and serves customers shipping primarily agricultural and manufactured products. Collectively, the three lines hauled approximately 6,000 carloads of freight during the fiscal year ended 2010. RailAmerica President and CEO John Giles said, "We are pleased to add these high-quality assets to our existing Alabama rail franchise. Collectively, the railroads have a solid customer base as well as a number of opportunities for further growth. Additionally, the railroads are clustered in close proximity to our existing Alabama operations, which we expect to create significant operating efficiencies. We look forward to partnering with new and existing customers on the line and with the local community to continue growing business on these lines." Giles added, "We continue to have a strong balance sheet to take advantage of acquisitions that complement our core business. We approach this process with a disciplined focus on investment criteria designed to generate attractive returns and operational synergies." For the next twelve months, RailAmerica anticipates these railroads will generate approximately $3.7 million in revenue, $1.2 million in operating income and $0.7 million in depreciation and amortization. RailAmerica intends to use cash on hand to finance the purchase.