Chicago-based FreightCar America, Inc. said Wednesday it has signed a definitive agreement to acquire the business assets of DTE Rail Services, a non-regulated subsidiary of DTE Energy, for approximately $23.2 million. The transaction is expected to close early in the fourth quarter.
Once the transaction is completed, the acquired business will bolster FreightCar America’s existing parts and repair service capabilities, the company said in a statement. “The collective offering will provide repair and maintenance, inspection, and fleet management services for all types of freight-carrying railcars. Upon closing, the acquired business will be known as FreightCar Rail Services, LLC," the company said.
“We are pleased to announce our definitive agreement with DTE Rail Services,” said Ed Whalen, president and CEO of FreightCar America. “The expansion of our railcar services activities will diversify our revenue sources and will serve to lessen the cyclicality of our earnings.”
He added, “Going forward, we expect that this addition will expand our customer base and strengthen existing relationships by significantly enhancing the company’s involvement in the entire railcar life cycle. The company will be well positioned to service coal-carrying railcars moving through the Powder River Basin in the Western United States. A majority of these coal cars were manufactured by FreightCar America. We look forward to working with the Rail Services team to grow our service offerings.”
DTE Rail Services has operations in Colorado, Indiana, and Nebraska and services freight cars and unit coal trains utilizing key rail corridors in the U.S. Midwest and West. The new business will add approximately 130 skilled employees to the company.
The proposed acquisition is subject to customary closing conditions. DTE Rail Services produces current annualized revenues of approximately $25.0 million and FreightCar America said it expects the transaction to be immediately accretive to its earnings.