As reported by the San Francisco Chronicle, Genesee & Wyoming Inc., which is a short-life rail operator, has agreed to purchase RailAmerica INc. for $1.39 billion. The purchase was made at $27.50 per share, which was 11% higher than RailAmerica’s closing price on July 20. The acquisition will merge North America’s two largest short-lines and rail operators. With the addition of RailAmerica’s lines, Genesee & Wyoming will now operate in 37 U.S. states, as opposed to 24 previously, with a total of 111 railroads (108 in North America), 15,000 miles of track (12,000 in North America), 1,000 locomotives (900 in North America) and 4,300 (3,900 in North America) employees. Seeing as the acquisition of RailAmerica was a large purchase, Genesse & Wyoming Inc. had to refinance more than $2 billion in debt to complete the merger. It is predicted that the deal will increase Genesee & Wyoming’s revenue by almost two thirds.
The merger of the two largest short-line’s in North America should serve as good news for the freight rail industry. A consolidation of rail operators leads to more streamlined operating and standardized procedures. Genesee & Wyoming had to dramatically increase their debt to make the purchase, but they would not have done so if the investment was not worth it. As they are now the largest short-line in North America by a large margin, Genesee & Wyoming Inc.’s railroads should have some of their best years in the near future.Posted in Freight Rail