Hedge fund to acquire carbuilder ARI

Written by Stuart Chirls, Senior Editor
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American Railcar Inc. is headquartered in the former American Car and Foundry offices in Saint Charles, Mo. Screen capture from Google Street View.

Amid a surging market for new railcars, American Railcar Industries agreed to sell itself back to a group led by its former founder and CEO at a premium more than 50% above its share price.

Majority stakeholder Carl Icahn stands to more than quintuple the value of his original 2010 investment in ARI in the sale to ITE Rail Fund, a subsidiary of hedge fund ITE Management L.P., for $70 per share, or 51% above ARI’s Oct. 19 closing price of $46.29. The transaction is valued at approximately $1.75 billion, including ARI debt.

The North American railcar manufacturing sector is enjoying a surge as ARI, Greenbrier Cos. and Trinity Industries saw second-quarter orders increase 35% on-year, to 23,788 units.

The railcar builder, based in Saint Charles, Mo., called it “a great result for all ARI shareholders.”

A company controlled by Icahn nearly two years ago agreed to sell ARI’s leasing arm to Mitsui Banking Corp. for $3.4 billion.

“The sale demonstrates the value this company, its employees and shareholders have created, and I would like to thank Icahn Enterprises L.P. for its support and guidance over the years,” said John O’Bryan, President and CEO of ARI. “I would like to thank the ARI team for their dedication to our values, vision, and commitment to serving our customers. We look forward to working with the ITE team to continue to improve our business and grow in the years to come.”

Jim Unger, a partner of ITE, said, “As one of ARI’s founders and, formerly, its President and CEO for almost 15 years, I know that ITE can work with this great organization and its people to continue to build and move America’s infrastructure. With its current railcar lease fleet of nearly 14,000 railcars and the foundation of its manufacturing and repair businesses, we are excited about partnering with the ARI team to support continued growth of the business.”

The transaction is expected to close in the fourth quarter of 2018, subject to customary approvals.

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