Genesee & Wyoming to pay $1.39B for RailAmerica

Greenwich-based Genesee & Wyoming announced last month it will buy RailAmerica in a close to $1.39 billion deal that combines the two largest short-line and regional rail operators in North America.

The combined company will operate 108 railroads in the U.S. and abroad. The deal is designed to try and diversify what the railroads carry, offering protection from prolonged weakness in certain shipments like coal and make it less dependent on certain big customers. According to a company press release, the combination will also allow the two companies to streamline their operations to save money.

Besides the U.S. and Canada, Genesee & Wyoming also operates railroads in Australia, the Netherlands and Belgium.

Genesee & Wyoming will paid $27.50 in cash for each share of RailAmerica Inc., which is based in Jacksonville, Fla. The price representes a premium of nearly 11% over RailAmerica’s closing price of $24.81 before the sale was announced.

The Surface Transportation Board, the agency that regulates U.S. railroads, still must approve the deal. The companies say that could happen by the fourth quarter. Genesee & Wyoming said it expects to close the deal via a voting trust as early as the third quarter and then it can fully integrate RailAmerica once it receives the regulatory approval.

It expects to pay for the deal and refinance existing debt with about $2 billion in new debt and $800 million in equity or equity-linked securities.

When the deal closes, it will expand Genesee’s network to 37 states, up from 24.

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