Genesee & Wyoming Devours RailAmerica for $1.4B

By Features FOXBusiness

Genesee & Wyoming (GWR) has agreed to buy RailAmerica (RA) for $1.4 billion in a deal that combines North America’s two largest short line and regional rail operators.

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Greenwich, Ct.-based Genesee & Wyoming scooped up RailAmerica in an all-cash deal valued at $27.50 a share, representing an 11% premium over Friday’s close price.

The railroad operator said the purchase will strengthen its ability to serve industrial customers and Class I railroad partners. Together, the companies will originate or terminate more than 4% of all U.S. carload traffic.

“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,” Genesee said in a statement.

Genesee expects to fund the transaction using debt financing from Bank of America’s (BAC) Merrill Lynch and The Carlyle Group (CG), including $2 billion of new debt and $800 million of equity or equity-linked securities.

Jacksonville, Fla.-based RailAmerica is 60% owned by Fortress Investment Group (FIG), which bought RailAmerica in 2007 and took it public two years later. The rail operator posted revenue of $551.1 million last year.

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The deal is subject to approval by the U.S. Surface Transportation Board. If approved by the end of the year as expected, Genesee said its earnings will get a 10% boost in 2013.