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US short line holding group Genesee & Wyoming Inc announced an agreement to buy approximately 95% of the shares of Freightliner Group from Arcapita and other shareholders on February 25.
The acquisition is expected to close during the first quarter of 2015. G&W will pay £490m in cash and assume £8·5m in net debt and capitalised leases. Members of the existing Freightliner management team will retain a stake of approximately 5%, with G&W planning to own 100% by mid-2020.
Freightliner was established in 1965 as British Rail’s intermodal business. At privatisation it was bought by a management and staff buy-out team backed by 3i and Electra Private Equity. Bahrain-based investment bank Arcapita subsequently acquired the group in 2008.
Freightliner Group now has intermodal, bulk freight and maintenance activities in the UK, runs open access freight operations in Poland, Germany and Australia and owns ERS Railways in the Netherlands. The group has 2 500 employees, and a fleet around 250 locomotives and 5 500 wagons which are primarily leased and are maintained in-house.
The annual revenue base of US$785m is derived from the UK (65%), Continental Europe (25%), and Australia (10%).
Freightliner Middle East was recently selected to support heavy haul operations on Saudi Arabia’s North-South Railway.
As well as its US and Canadian interests, G&W operates the Tarcoola – Alice Springs – Darwin line in Australia and owns Rotterdam Rail Feeding in the Netherlands.
According to Jack Hellmann, President & Chief Executive Officer of G&W Inc, ‘the acquisition of Freightliner is an excellent strategic fit. We are excited to be adding a world class intermodal and heavy haul franchise in the UK that will be the foundation of G&W’s European Region. Further, the overlap of our respective rail businesses in Australia and the Netherlands will unlock operating synergies and expand our presence in each of those markets.’
Hellmann said that following the Freightliner acquisition, ‘G&W will be best understood by looking at three parts. The first will be our traditional North American short line and regional railroad operations, which is expected to contribute approximately 77% of annual pro forma operating income, where we will continue to execute on our long-term plan of commercial growth across our coast-to-coast rail footprint as well as acquisition growth from further consolidation of the short line rail industry. The second will be our Australian Operations, which is expected to contribute approximately 12% of annual pro forma operating income, where our above-rail and below-rail operations in South Australia and the Northern Territory will be combined with Freightliner’s above-rail business in New South Wales. The third part will be our European Operations, which is expected to contribute approximately 11% of annual pro forma operating income, with Freightliner’s UK business as the cornerstone that also will lead the development of our intermodal business serving deep sea ports in northern Europe and our heavy haul operations in Poland.’
Freightliner Group CEO Russell Mears said ‘Genesee & Wyoming brings additional investment firepower, extended international reach and increased below-rail infrastructure expertise to add to the existing strengths of the Freightliner Group.’
This article first appeared on www.railwaygazette.com
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