G&W concludes Freightliner acquisition

Written by William C. Vantuono, Editor-in-Chief
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Genesee & Wyoming Inc. on March 25, 2015 completed the acquisition of approximately 94% of Britain’s Freightliner Group Ltd. for approximately US$733 million (at current exchange rates), plus the assumption of approximately US$29 million (at current exchange rates) of net debt and capitalized leases.

Members of the existing Freightliner management team will retain an approximate 6% economic interest in Freightliner, with G&W to reach 100% ownership by mid-2020.

In connection with the Freightliner acquisition, G&W also entered into a new five-year senior secured credit facility comprised of a $2.175 billion term loan and a $625 million revolving credit facility. G&W expects to have approximately $475 million of revolving capacity after the Freightliner closing.

The acquisition and related financing will result in one-time expenses in the first quarter of 2015 totaling approximately US$29 million comprised of approximately $15 million of foreign exchange loss resulting from the difference between the actual U.S. dollar cost of the pound sterling acquisition (US$748 million), which included forward purchases of pound sterling at a weighted average exchange rate of 1.52 USD/GBP, and the U.S. dollar acquisition price of approximately $733 million; and approximately US$14 million of advisory fees, legal fees, and transfer taxes associated with the Freightliner acquisition and related financing.

In other news, G&W said its traffic in the first quarter of 2015 “has been weaker than our expectations due to severe winter weather in four of our American regions, as well as weakness in certain commodity groups, including steam coal and metals. Based on first quarter results to date, we expect total revenues in the first quarter to be approximately $375 million, or $25 million below the guidance of $400 million provided on Feb. 10, 2015. In addition, we expect costs to be approximately $5 million higher as a result of the extreme winter conditions. As a result of these factors, we expect net income in the first quarter of 2015 to be approximately $10 million below guidance.”

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