Genesee & Wyoming to go private
Genesee & Wyoming (GWR) shares rose 9% on July 1. The company announced its acquisition by a consortium of two infrastructure investment firms. Brookfield Infrastructure (BIP), in partnership with the affiliates of its parent company Brookfield Asset Management (BAM), and the Singaporean sovereign wealth fund GIC signed a definitive agreement to acquire Genesee & Wyoming.
With the announcement on July 1, Genesee & Wyoming put all of the speculations to rest. In March, Bloomberg published an article about buyout rumors. Citing anonymous sources, Bloomberg stated that Genesee & Wyoming “is exploring strategic options including the sale of all or part of itself.”
The transaction is valued at $8.4 billion including debt. According to the acquisition deal, Genesee & Wyoming shareholders will receive $112 in cash for each share they hold. The offer price represents a 39.5% premium to the closing price on March 8—the last trading day before the buyout rumors.
The acquisition is expected to be completed by the end of 2019 or early 2020. After the acquisition is complete, Genesee & Wyoming will become a privately-held entity.
Brookfield Infrastructure’s footprints
The acquisition will add another growth engine to Brookfield Infrastructure and improve its rail operations. Genesee & Wyoming owns or leases 120 short-line rails, which cover ~16,000 miles of track. The company operates across North America, Australia, and Europe.
Genesee & Wyoming’s broad portfolio complements Brookfield Infrastructure’s business, which lacks exposure in the North American and European regions. Currently, Brookfield Infrastructure covers 6,400 miles across Australia and South America. The acquisition will enhance the company’s global footprints in two more areas and boost its business in Australia.
Sam Pollock, Brookfield Infrastructure’s CEO, said, “G&W will be a significant addition to our global rail platform and will expand our presence in this sector to four continents. 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. Brookfield Infrastructure is well suited to work with the company to continue to improve the business, given our significant experience owning and operating rail, ports and other large scale, transportation infrastructure businesses.”
Genesee & Wyoming shares have been on an upward trajectory since the beginning of the year. However, the significant boost came after Bloomberg’s published report on March 11. The report triggering a sudden spike in Genesee & Wyoming’s stock price. The stock has gained 47% in 2019. So far, the railroad industry has seen upward momentum in 2019. To learn more, read Railroad Stocks: Q1 Earnings Beat the Estimates.
Genesee & Wyoming’s YTD gains have outpaced the iShares Transportation Average ETF’s (IYT) returns. So far, IYT has risen 14.6% YTD. IYT tracks Down Jones transportation stocks’ performances. Genesee & Wyoming stock has also outperformed Kansas City Southern (KSU) and Norfolk Southern (NSC), which have gained 29% and 34.4%, respectively.