Genesee & Wyoming Inc. enters agreement to acquire RailAmerica

Written by Jenifer Nunez, assistant editor
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Genesee & Wyoming Inc. and RailAmerica, Inc. have entered into an agreement under which GWI will acquire RailAmerica for an all cash purchase price of $27.50 per share. GWI's acquisition of RailAmerica will combine the two largest shortline and regional rail operators in North America.

GWI expects to fund the transaction and the simultaneous refinancing of its existing debt with approximately $2 billion of new debt and approximately $800 million of equity or equity-linked securities. GWI has received $2.3 billion of committed debt financing from BofA Merrill Lynch and $800 million of committed equity financing from The Carlyle Group of which it has agreed to take a minimum of $350 million through a private placement of two-year mandatorily convertible preferred stock from Carlyle Partners V, a $13.7 billion U.S. buyout fund.

The Carlyle Convertible has a coupon of five percent per annum for two years and is mandatorily convertible at a conversion price of $58.49. GWI has the option to fund up to an additional $450 million of The Carlyle Convertible on the same terms, subject to certain conditions. Alternatively, GWI may instead choose to fund the $450 million through the public issuance of equity or equity-linked securities.

Jack Hellmann, president and CEO of GWI said, “The acquisition of RailAmerica by GWI is a straightforward combination of two organizations with overlapping holding company structures and complementary railroad geographies. As a result, the synergies between the companies are expected to be significant and we anticipate unlocking significant shareholder value.”

John Giles, president and CEO of RailAmerica said, “This is an exciting day for both RailAmerica and Genesee & Wyoming. For RailAmerica, the sale represents validation of the transformational improvements that our management team and employees have made since the acquisition of the business in 2007 by investment funds managed by affiliates of Fortress Investment Group LLC. From this strong base of operations and having unlocked significant shareholder value, a combination with Genesee & Wyoming is the logical next step in creating a combined organization that will be a powerful driver of North American rail traffic for decades to come.”

Categories: OFF Track Maintenance, Shortline/Regional