Genesee & Wyoming, Inc. (NYSE: GWR) announced that the sale of the company to affiliates of infrastructure asset management firms Brookfield Infrastructure (NYSE: BIP) and GIC has been completed.
The deal results in each share of GWR common stock converted into a right to receive $112 in cash. The stock ceased trading on the NYSE prior to today’s session with a final closing price of $111.88.
“This transaction is an excellent outcome for all G&W stakeholders. For our customers, employees and Class I partners, the long-term investment horizon of Brookfield and GIC is perfectly aligned with the long lives of G&W railroad assets. We look forward to building on G&W’s track record of safety, service excellence and commercial growth as we become an important component of a portfolio of global infrastructure assets,” said G&W’s CEO Jack Hellmann.
G&W has a long history with private equity and energy infrastructure firms. The company has leveraged its investment partners to bid on potential acquisitions in the past.
The Darien, Connecticut-based short line rail operator amassed a large portfolio of short line and regional freight railroads through bolt-on acquisitions since its initial public offering in 1996. Some of the larger deals included a nearly $300 million deal for Australian railroad FreightLink in 2010, the $1.4 billion acquisition of its Jacksonville-based competitor RailAmerica in 2012 and a more than $750 million deal for U.K.-based Freightliner in 2015.
Historically, G&W’s stock price was predicated on potential growth through future acquisitions. In the United States, short line railroads typically operate short distances of track, interchanging freight with the larger Class I railroads or providing service into and out of industrial facilities. Serving one customer or facility in a limited capacity makes incremental revenue growth difficult, thus the need to increase revenue, earnings and consequently stock valuation through acquisitions.
Short line M&A activity to continue
Many in the investment community operated under the thesis that after decades of accumulating stand-alone short line railroads, G&W would be acquired at a significant premium. The $8.4 billion takeout of G&W (announced on July 1), represented a 40% premium to the share price at the time.
G&W has roughly 8,000 employees and operates 119 freight railroads and 16,000 track-miles throughout North America, Europe and Australia. The operator provides interchange service to the Class I railroads in the U.S. and direct transport to/from industrial facilities of bulk commodities like coal, minerals, lumber, chemicals and agricultural products, as well as intermodal traffic. G&W moves more than three million carloads annually.