Carlyle Group (CG) Invests $800M in Genesee & Wyoming (GWR), RailAmerica (RA) Deal
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Overview of Combined OperationsGWI’s
acquisition of RailAmerica will combine the two largest short line and
regional rail operators in North America. The transaction is
transformational for GWI’s North American operations, as GWI will now
operate 108 railroads over more than 12,000 track miles. The transaction
increases GWI’s total revenues by nearly two-thirds to approximately
$1.4 billion (2011) and doubles North American revenue to approximately
$1.1 billion (2011). Following the transaction, GWI will have 111
railroads (108 in North America), 15,120 miles of track (12,300 in North
America), 1.9 million carloads (1.7 million in North America), 1,000
locomotives (900 in North America) and 4,300 employees (3,900 in North
America).
The transaction significantly increases GWI’s customer and commodity
diversification. In 2011, no single customer would have represented more
than 3% of pro forma revenues, and no single commodity group would have
represented more than 13% of pro forma freight revenues. On a geographic
basis, GWI’s footprint of railroads will grow from 24 U.S. States to 37
U.S. States, while the United States overall will represent
approximately 70% of GWI’s pro forma revenue, with Australia at 20%,
Canada at 10% and Europe at less than 1%. Following the transaction, GWI
expects to originate or terminate more than 4% of carload traffic in the
United States, with volumes well balanced across all of the Class I
carriers.
GWI plans to integrate RailAmerica’s 45 railroads into GWI’s eight
existing North American Regions and to create two new regions,
headquartered in Michigan and Texas, respectively. Centralized
administrative functions, including accounting, information technology,
human resources, operations support, customer service and others will
continue to be provided from offices in both Jacksonville, FL and
Rochester, NY, with GWI’s corporate headquarters remaining in
Connecticut.
GWI is an experienced acquirer of short line railroads, having
integrated 65 railroads through 36 acquisitions since 1985. The
operational integration of RailAmerica will be led by GWI’s current
Chief Operating Officer, Jim Benz, who will manage the integration until
its completion, postponing his previously announced retirement. Upon Mr.
Benz assuming his integration responsibilities, David A. Brown will
succeed Mr. Benz as Chief Operating Officer of GWI.
Expected TimingRailAmerica’s majority
stockholder, RR Acquisition Holding LLC, controlled by Fortress
Investment Group, executed a written consent adopting the merger
agreement. No further approval of the stockholders of RailAmerica is
required to adopt the merger agreement. However, until the 30th
day following the execution of the merger agreement, RailAmerica may
terminate the merger agreement to accept a superior proposal, subject to
payment to GWI of a termination fee of $49 million.
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