BIZMOLOGY — You hear that? A major acquisition is roaring down the track as one of the largest railroad operators is about to get a lot larger. This week it was announced that Genesee & Wyoming Inc. (GWI), owner of 66 regional railroads, is buying rival RailAmerica for almost $1.4 billion.
The milestone deal will create the largest short-line railroad operator in the US. (Short-line railroads generally run less than 350 miles long.) The combined company will boast a network of about 110 railroads, 15,100 miles of track, and $1.4 billion in annual revenue. On the downside, the transaction will more than triple GWI’s debt, but GWI believes the new entity’s increased cash flow will allow it to quickly recover.
The combined company will originate or terminate more than 4% of all US carloads in its class across North America, according to GWI president and CEO Jack Hellmann.
The purchase will also shift GWI’s growth strategy back to North America as it has been focused mainly on expanding its operations in Australia. It recently purchased Australia’s FreightLink rail network for about $332 million Australian dollars ($319 million). FreightLink served general freight and mining customers in South Australia and now operates as part of Genesee & Wyoming Australia. Through these operations, GWI now has a gateway for expanding into the coveted China transportation market.
RailAmerica owns interests in 45 railroads that operate over a network of about 7,500 miles of track. It has some 1,500 customers and transports such items as coal, lumber and forest products, chemicals, and agricultural products.
This is a significant deal for the railroad industry, which hasn’t generated news this buzzworthy since Warren Buffett bought Burlington Northern Santa Fe, the nation’s second largest railroad (behind leader Union Pacific), a few years back.