- The transaction combines the two largest short line and regional railroad operators in North America, with 108 railroads and strong exposure to eventual U.S. economic recovery.
- Estimated pro forma Total Debt to EBITDA of 4.0x at the end of 2012, which is expected to decrease to approximately 3.0x by the end of 2013.
- The acquisition is subject to United States Surface Transportation Board (“STB”) formal approval of GWI’s control of the RailAmerica railroads. GWI expects to close the transaction into a voting trust as early as Q3:2012 while it awaits formal STB approval of GWI’s application to control RailAmerica’s railroads. Upon formal STB approval, GWI would be able to fully integrate RailAmerica. STB formal approval may be as early as Q4:2012 but could be delayed until Q3:2013.
- While the RailAmerica railroads are held in a voting trust, GWI expects to account for the acquisition using the equity method of accounting and will not realize the cost synergies of the business combination. Upon integration, cost savings are expected to be at least $36 million (75% realized within one year of close; 100% realized within 18 months of close).
- If GWI is approved to fully integrate RailAmerica’s railroads by Q4:2012, EPS accretion is expected to be greater than 10% in 2013.
- The $27.50 per share purchase price represents a premium of 10.6% over the closing stock price as of July 20, 2012, the last trading day prior to this announcement, and a premium of 27.6% over the closing stock price as of May 21, 2012, the last trading day prior to the date on which RailAmerica announced that it was exploring strategic alternatives.
Genesee & Wyoming Inc. (GWI) (NYSE: GWR) and RailAmerica, Inc. (NYSE: RA) jointly announced today that they have entered into an agreement under which GWI will acquire RailAmerica for an all cash purchase price of $27.50 per share. GWI’s 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. 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 BofA Merrill Lynch (“BofAML”) and $800 million of committed equity financing from The Carlyle Group (“Carlyle”) (NASDAQ: CG) 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. The Carlyle Convertible has a coupon of 5% per annum for two years and is mandatorily convertible at a conversion price of $58.49. GWI has the option to fund up to an additional $450 million of The Carlyle Convertible on the same terms, subject to certain conditions. Alternatively, GWI may instead choose to fund the $450 million through the public issuance of equity or equity-linked securities. Conference Call GWI will conduct a live conference call and webcast this morning at 11 a.m. EDT. In the U.S., call (800) 553-0326; outside the U.S., call (612) 332-0345. Management will be referring to a slide presentation that will be available at www.gwrr.com/investors prior to the conference call. The webcast will be archived at www.gwrr.com/investors, and telephone replay is also available for 30 days beginning at 1 p.m. EDT today by dialing (800) 475-6701 (or outside U.S., dial 320-365-3844). The access code is 255426. Additional Highlights of the Transaction