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Genesee & Wyoming Inc. has confirmed rumors that it had been seeking a buyer. The railroad, which got its start in the Rochester area some 120 years ago, will be acquired by Brookfield Infrastructure Partners, GIC and Brookfield Infrastructure’s institutional partners in a deal worth roughly $8.4 billion.
Following the announcement, G&W stock (Nasdaq: GWR) surged nearly 9 percent in heavy trading Monday morning to $108.71. Bloomberg first reported whispers of a sale in March.
Upon completion of the acquisition, expected to take placein late 2019 or early 2020, G&W will become a privately held company. Stockholders will receive $112 in cash per share of common stock.
“We believe this transaction is an excellent outcome for all G&W stakeholders,” G&W Chairman and CEO Jack Hellmann said in a statement Monday. “For our current stockholders, the sale price realizes significant value and represents a 39.5 percent premium to our March 8 share price. And for long-term investors who have owned our shares for the past two decades, the sale price represents a return of more than 5,400 percent.”
The acquisition agreement, filed with the Securities and Exchange Commission Monday, includes a termination fee of $388 million to G&W if Brookfield Infrastructure and GIC end the deal and $194 million to Brookfield Infrastructure and GIC if G&W ends the deal.
G&W owns 120 short line railroads, predominantly in North America, with operations in Europe and Australia. G&W’s corporate headquarters is in Darien, Conn., and its operating headquarters is in Jacksonville, Fla. The railroad’s administrative headquarters is at Meridian Centre in Brighton.
“For our customers, employees and Class I partners, the long-term investment horizon of Brookfield Infrastructure and GIC as seasoned infrastructure investors is perfectly aligned with the long lives of G&W railroad assets, which are integral to the local economies that we serve in North America and around the world,” Hellmann said. “They are also fully supportive of our business plan, which will continue to be focused on safety, customer service and growing our footprint to provide more opportunity for our people. We also expect this transaction will allow us to further enhance our business as we benefit from Brookfield Infrastructure/GIC’s expertise in real estate and technology, as well as relationships with their rail-centric/complementary portfolio companies.”
G&W was founded in 1899 when Edward Fuller and some partners purchased a 14-mile railroad out of bankruptcy to transport salt from their mine in Retsof, Livingston County. For most of its first century, G&W operated the same rail line serving International Salt Co.
In 1977, Fuller’s great-grandson purchased a controlling interest in the company, which continued to serve principally one customer on its 14-mile line. G&W entered the rail car leasing and management business, primarily focused on covered hoppers to serve the salt industry.
From 1985 to 1996, following deregulation of the industry, G&W began making acquisitions, which included Dansville & Mount Morris Railroad, Rochester & Southern Railroad, Buffalo & Pittsburgh Railroad and several others. G&W also purchased Rail Link, a provider of industrial switching and port rail services.
In 1997 the company began an international acquisition strategy, entering the Canadian and Australian markets with the purchases of Quebec Gatineau Railway and Australia Southern Railroad, among others. Throughout the early 2000s, G&W returned to domestic acquisitions, buying Utah Railway, Georgia Pacific Railroads and Rail Management Corp.
G&W now runs eight locally managed operating regions with roughly 8,000 employees. G&W’s six North American regions serve 41 U.S. states and four Canadian provinces and include 114 short line and regional freight railroads with more than 13,000 track-miles.
“This is a rare opportunity to acquire a large-scale transport infrastructure business in North America,” said Brookfield Infrastructure CEO Sam Pollock. “G&W will be a significant addition to our global rail platform and will expand our presence in this sector to four continents. G&W provides critical transportation services to more than 3,000 customers, and its cash flows have proven to be highly resilient over many years. Brookfield Infrastructure is well suited to work with the company to continue to improve the business, given our significant experience owning and operating rail, ports and other large scale, transportation infrastructure businesses.”
Brookfield Infrastructure is a leading global infrastructure company that owns and operates high quality, long-life assets in the utilities, transport, energy and data infrastructure sectors across North and South America, Asia Pacific and Europe.
Brookfield Infrastructure’s investment will be roughly $500 million of equity. The remainder of the business will be owned by Brookfield Infrastructure’s institutional partners and GIC. Brookfield Infrastructure’s investment will be funded from existing liquidity which totaled some $1.9 billion on June 30.
Added Ang Eng Seng, chief investment officer for infrastructure at GIC: “As a long-term investor, GIC is confident G&W will continue to generate steady profitability, given its diversified operations and customer base. We look forward to partnering with G&W’s management and Brookfield Infrastructure to support the future growth of the company.”
GIC is a leading global investment firm established in 1981 to manage Singapore’s foreign reserves. Headquartered in Singapore, GIC employs more than 1,500 people across 10 offices in key financial cities worldwide.
G&W will cease reporting monthly carloads and will not hold a conference call for its second quarter 2019 financial results. The railroad expects to file its second quarter 2019 financials by close of business on Aug. 9.
The railroad has reported lackluster carloads in April and May. G&W missed Street estimates in April when it reported a slide in first-quarter sales and income. Railroad officials said income was impacted by severe winter weather during the first quarter.
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