Genesee & Wyoming Devours RailAmerica for $1.4B

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

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 (NYSE:BAC) Merrill Lynch and The Carlyle Group (NYSE: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 (NYSE:FIG), which bought RailAmerica in 2007 and took it public two years later. The rail operator posted revenue of $551.1 million last year.

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.