Darien-based freight railroad operator Genesee & Wyoming has agreed to be acquired by Brookfield Infrastructure of Toronto and Singaporean sovereign wealth fund GIC in a deal worth $8.4 billion, including debt.
The transaction will result in Genesee & Wyoming becoming a privately held company. It traded on the New York Stock Exchange as GWR.
Genesee & Wyoming owns a portfolio of 120 short line railroads, predominantly in North America, with operations in Europe and Australia. Through its subsidiaries worldwide, the business provides transportation infrastructure services over more than 16,000 miles of track.
“We believe this transaction is an excellent outcome for all G&W stakeholders,” G&W Chairman and CEO Jack Hellmann said. “For our current stockholders, the sale price realizes significant value and represents a 39.5% premium to our March 8th share price. And for long-term investors who have owned our shares for the past two decades, the sale price represents a return of more than 5,400%.”
Hellmann said the railroad’s business plan would continue to focus on safety and customer service. “We also expect this transaction will allow us to further enhance our business as we benefit from Brookfield Infrastructure/GIC’s expertise in real estate and technology,” he added, “as well as relationships with their rail-centric/complementary portfolio companies.”
“G&W will be a significant addition to our global rail platform and will expand our presence in this sector to four continents,” Brookfield Infrastructure CEO Sam Pollock said. “G&W provides critical transportation services to more than 3,000 customers and its cash flows have proven to be highly resilient over many years.”
Pursuant to the agreement, each issued and outstanding share of G&W will be converted into the right to receive $112 per share in cash. The per-share transaction price represents a 39.5% premium to the unaffected per share price of $80.28 on March 8, the day prior to initial media speculation of a potential transaction.
Brookfield Infrastructure’s investment will be approximately $500 million of equity. The remainder of the business will be owned by Brookfield Infrastructure’s institutional partners and GIC. Brookfield’s investment will be funded from existing liquidity which totaled approximately $1.9 billion at June 30.
Greenwich’s Blue Harbour Group LP, the largest active owner of G&W with approximately 2 million shares representing about 4% of the company, expressed approval of the transaction.
Robb A. LeMasters, a Blue Harbour managing director, said his firm invested in Genesee & Wyoming “because we believed its share price did not reflect its unique combination of short line railroad market leadership, powerful cash generation, strong balance sheet and experienced management team.”
The transaction is expected to close by year end or early 2020 and is subject to customary closing conditions, including approval by G&W stockholders holding 66 2/3% of the outstanding common stock, required regulatory approvals that include approval by the Committee on Foreign Investment in the United States, the U.S. Surface Transportation Board, and certain competition and antitrust approvals.
BofA Merrill Lynch and Morgan Stanley & Co LLC served as financial advisors, and Simpson Thacher & Bartlett LLP, as well as Addleshaw Goodard LLP, Allens, Clark Hill PLC, Macfarlanes LLP and Stikeman Elliott LLP, served as legal advisors to G&W. In addition, Wachtell, Lipton, Rosen & Katz served as counsel to G&W’s board of directors.