G&W aquires RailAmerica

Genesee & Wyoming, Inc. (GWI) to acquire Rail America (RA) for $27.50 per share. Both companies are listed on the New York Stock Exchange.

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.

http://www.marketwatch.com/story/genese ... 2012-07-23

GWI is an experienced acquirer of short line railroads, having integrated 65 railroads through 36 acquisitions since 1985. The operational integration of RailAmerica will be led by a joint integration team from both companies.

Besides the US and Canada, GWI also has significant operations in Australia.

In the shortline world, this is really huge. It will be interesting to see how this works out. I don't know if RA and GWI railroads touch each other in many places. It will likely take some time to get all the approvals and paperwork done.

Reported in today's WSJ, but don't expect any immediate effect on operations in New England because the deal won't close until the third quarter of next year. As you probably know, RA owns owns New England Central and Connecticut Southerm, and G&W owns the St. Lawrence & Atlantic.

PBM

I would expect to see SLR units heading to St. Albans for work as such was the arrangement when both CV and GT were under CN (That being GT locos going to St. Albans for work). Certainly interesting times.

From a business perspective, this is no simple transaction. Actually, the STB has a tough job of looking into the Sherman act/Anti Trust Act at places where the G&W and RA both serve to see if a monopoly of service may form. Of course, Railroad's always have the card up their sleeves about this that they also compete with trucks. This seems to have been the umbrella solution to this problem for quite some time.

Will be interesting to see. Maybe those SD70M-2's on the FEC will become Orange?

http://www.progressiverailroading.com/p ... p?id=31770

In one large gulp, we see the major shortline/regional holding companies go from three to two. Look for the newly combined company to shed itself of some lines to pay down debt. I also found it interesting that G&W is paying a minimal premium over yesterday's close. Lawsuits about shareholder value have already been announced.

This was not surprising, since Fortress announced it wanted to sell the whole shooting match. From all my interactions, RA seemed stuck in the CSX mold, with its limited creative thinking and modest performance. Many of its hires were ex-CSX people and it regarded industry veterans more highly than new people. I don't know G&W quite as well, so I'm curious what culture clashes are about to happen.

Additional news:

http://news.yahoo.com/genesee-wyoming-p ... tml?_esi=1

http://www.reuters.com/article/2012/07/ ... EF20120723

FEC is still being retained by Fortress yes?

FEC is worth a lot in real-estate; don't know if Fortress would want to dispose of it before they develop that and their HSR.

Also found an article on this: GWI plans $1.39B acquisition of Rail America

Genesee & Wyoming announced it will acquire RailAmerica for $1.39 billion in cash. The purchase would blend the two largest short-line and regional railroad operators in North America and give the company 108 railroads. The purchase must be approved by the Surface Transportation Board.

Quick, clarifying question. G&W itself is originally a Class III. G&W know is a holding company, a conglomeration of short-lines. Where should I classify this? Class I seems out of the question Class II seems appropriate in toto, but are any one of the railroads Class II? Or would you call it Class III?

For know, this is pretty big, so I"ll "global" it, but would like input on where to park it.

FEC was never considered a Rail America property. It just had management connections.

And one bunch of lawyers is afraid another bunch of lawyers is going to cut them out if the gravey train.

http://www.prnewswire.com/news-releases ... 25936.html

"Our investigation concerns whether the RailAmerica board of directors is fulfilling its fiduciary duties, maximizing the value of the Company, disclosing all material benefits and costs, and obtaining full and fair consideration for Company shareholders."

The majority of G&W lines are small enough to be Class III,
although a few are big enough to be Class II:

http://en.wikipedia.org/wiki/Buffalo_an ... h_Railroad

None are Class I.
Although as a whole, you cant really say the G&W is Class-anything..since its not one railroad..
you have to take each "G&W family" shortline on a case by case basis.

There was originally the ancestral Genesee & Wyoming Railroad of NY state..a Class III shortline.
A salt-hauling railroad that existed from 1894 to 2002:

http://1stclass.mylargescale.com/Scottychaos/GW/

That original G&W was absorbed into the Rochester & Southern Railroad (the first of the "G&W family" shortlines, after the original G&W) around 2002, ceasing to exist as the original "Genesee & Wyoming Railroad"..
then, for reasons I still don't understand, the G&W Corporation "gave" the "Genesee & Wyoming Railroad" name to one of their shortlines in Australia!
which makes no sense to me at all, but there it is..

So today, all of the "G&W family" shortlines have their own name (Rochester & Southern, Buffalo & Pittsburg, Huron Central, etc)
and one of those "family" railroads happens to now be the *Second* Genesee & Wyoming Railroad, in Australia..

Scot

Fiduciary duties are always difficult matters. Of course, this is to be expected. I don't believe anything will come of this.

A little more detail this morning:

http://www.railwayage.com/index.php/fre ... channel=94

At 12,000 route miles (TWICE the size of KCS), I don't think you can call it a Class III under any circumstance. Just because it's geographically dispersed doesn't reduce its market power. For regulatory purposes, the division between Class I and II has always been based on aggregated revenue, and the perverse incentives from the STB are to avoid being a Class I if possible. Most class IIs are larger than the fallen flag Class Is we remember.

Doesn't the fact that all of them operate under their own marks segment the combined revenue under the "official" definition such that they can't be counted as a single entity for those purposes? Functionally, yes, market power is market power. But the arcane classification rules don't seem to be very forgiving to this type of setup.

SlowFreight wrote:http://www.progressiverailroading.com/p ... p?id=31770

I also found it interesting that G&W is paying a minimal premium over yesterday's close. Lawsuits about shareholder value have already been announced.

RailAmerica went public with their intent to look for 'strategic alternatives' back in May. The G&W offer of $27.50 is about a 25% increase from where they were trading then, so I wouldn't read too much into the fact that it's a minimal premium over the recent close. The market knew something was coming, and a 25% bump isn't bad.

Further, the lawsuits are all for not, just ambulance chasers. Fortress still owns a majority of RailAmerica's common stock even after taking the company public again about 2.5 years ago. As part of the agreement, Fortress has agreed to vote their shares in favor of the deal, so no further vote is needed. (So, if anybody reading this happens to own a couple shares of RA don't expect anything in the mail soliciting your vote.)

Unless the STB has an issue, this is essentially a done deal.