Brookfield buys rail operator Genesee for $6.3 billion plus debt

An affiliate of Brookfield Asset Management agreed to buy Genesee & Wyoming for about $6.3 billion (U.S.) plus debt (total $8.4 billion), expanding its global portfolio of rail companies with a 120-line network spanning North America, Europe and Australia.

Brookfield will pay $112 a share in cash, a 40 per cent premium from G&W’s close on March 8, the last day of trading before Bloomberg reported that the railroad was exploring a possible sale.

The deal is valued at $8.4 billion including debt, the companies said in a statement.

Buying G&W will hand a Brookfield consortium, which includes GIC, more than 3,000 customers, alongside a resilient cash flow. The railroad, which also had attracted activist investor Blue Harbour Group, doesn’t compete directly with the largest North American railroads, such as Union Pacific, CSX and Canadian National Railway. It has operations in Australia, the U.K. and continental Europe, as well.

“The transaction announced today unlocks the significant shareholder value that GWR’s management team has built over many years, both through acquisitions and operational execution,” Blue Harbour managing director Robb A. LeMasters said in a statement, referring to the railroad’s ticker symbol.

Blue Harbor began investing in G&W last year, when the stock traded at about $75 a share, he said.

G&W had climbed 35 per cent this year through Friday, compared with a 17 per cent gain for the Standard and Poor’s Midcap 400 Index. The stock is valued at 23 times estimated earnings, compared with the industry gauge which is trading at 16.6 times.

The transaction is expected to close by early 2020.