GWI said its acquisition of RailAmerica will combine the two largest short line and regional rail operators in North America, strengthening GWI's ability to serve its industrial customers and Class I railroad partners.
In addition, the combination should yield significant synergies and provide strong leverage to the eventual recovery of the U.S. economy, while creating a powerful platform for future industrial development along railroads in the 37 U.S. states in which GWI will do business, both companies said.
GWI expects to fund the transaction and the simultaneous refinancing of its existing debt with approximately $2.0 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 Bank of America's 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 ("The Carlyle Convertible") from Carlyle Partners V, a $13.7 billion U.S. buyout fund.
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."
Hellmann noted " the transaction is transformational for our North American operations, as GWI will now operate 108 railroads over more than 12,000 track miles. From a commercial standpoint, we believe that this footprint not only provides us with strong leverage to any eventual recovery of the U.S. economy but also creates a powerful platform for future industrial development along railroads in the 37 U.S. states in which we will do business."
RailAmerica President and CEO John Giles 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."
Shares of RailAmerica were up roughly 10% early Monday afternoon on the Nasdaq. Shares of GWI also were up, though modestly, in Monday afternoon trading on the New York Stock Exchange.