Foreign investors take railroad operator private in $8.4B deal
With a history dating back to the dawn of the 20th century and a rail spur to an upstate New York salt mine, Genesee & Wyoming completed on Monday its hookup to a pair of money managers that own the railroad operator going forward.
From its main office in Darien, Genesee & Wyoming oversees about 120 railroads in North America, Europe and Australia that link commodities producers to ports and longhaul, “class I” freight lines like CSX Transportation, BNSF Railway and Union Pacific. The company employs about 8,000 people.
Genesee & Wyoming’s lines include the Providence & Worcester Railroad, the Connecticut Southern Railroad and the New England Central Railroad which all operate in Connecticut, with the Providence & Worcester offering occasional excursion service including an annual “Polar Express” holiday schedule that includes a reading of the classic children’s book and gifts for kids from Santa Claus.
In addition to its Darien headquarters where about 20 executives and support staff work, Genesee & Wyoming has an operations hub in Jacksonville, Fla. and an administrative office in Rochester, N.Y.
In July, Genesee & Wyoming reached an $8.4 billion deal to be taken private by the infrastructure investment arm of Torontobased Brookfield Asset Management in syndication with GIC, a fund that manages Singapore’s foreign reserves, with the transaction finalized on Monday.
Earlier this year, Fortune ranked Genesee & Wyoming among the 25 largest companies based in Connecticut as listed by annual revenue, and the second largest in the transportation sector after the Greenwichbased freight trucking company XPO Logistics. In its final full quarter as a publicly traded company, Genesee & Wyoming earned $69.7 million on $584 million in revenue.
Mortimer Fuller III purchased Genesee & Wyoming’s original, 14mile rail line in 1977, with his great grandfather Edward Fuller having established the company in 1899. With the 1980 deregulation of freight rates under the Staggers Rail Act, Fuller began acquiring other shortline operators, tapping additional capital by taking the company public in 1996.
Fuller retired as CEO in 2007 and as board chairman two years ago, with Genesee & Wyoming having been led the past dozen years by CEO Jack Hellmann. In a conference call last April, Hellmann described the company’s acquisition strategy which will continue under Brookfield and GIC ownership, without commenting at the time on rumors already swirling of a possible buyout of Genesee & Wyoming itself.
“The opportunity ... to either bolt on or make contiguous line acquisitions is something we spend a great deal of time on,” Hellmann said in April. “We’ve got 400plus miles (of ) contiguous rail systems that we’ve built out over time in the Northeast United States ... (from) seven contiguous acquisitions.
“It’s the basic playbook for what we seek to do because of synergies of putting small assets together, getting the density on the rail lines, increasing asset utilization, and ... open up some routes for connecting (to) class I carriers,” Hellmann added.
Exiting October, the federal Surface Transportation Board issued a required exemption to Brookfield and GIC for the acquisition of Genesee & Wyoming, over objections from the International Association of Sheet Metal, Air, Rail and Transportation Workers union which represents company employees in New York. The deal also came under the review of the Committee on Foreign Investment in the United States.