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2/25/2015



Rail News: M&A

Genesee & Wyoming to acquire Freightliner Group


Genesee & Wyoming Inc. (GWI) yesterday announced it entered into an agreement to acquire about 95 percent of Freightliner Group Ltd.'s shares from Arcapita and other shareholders for cash consideration of $755 million and the assumption of $13 million in net debt and capitalized leases.

Members of Freightliner's management team will retain a 5 percent ownership interest in the company with the understanding that GWI will assume a 100 percent stake by mid-2020. The acquisition is expected to close during the first quarter.

Headquartered in London, Freightliner is an international freight-rail service provider operating in the United Kingdom, Poland, Germany, Netherlands and Australia. The company's principal business is located in the U.K., where it's the second-largest freight-rail operator, providing intermodal and heavy haul services in England, Scotland and Wales.

In Europe, Freightliner Poland primarily serves aggregates and coal customers in Poland, and also operates in eastern Germany, while an ERS subsidiary based in Rotterdam provides cross-border intermodal services. In Australia, Freightliner transports coal and containerized agricultural products for customers in New South Wales, and is an accredited rail service provider in Western Australia, South Australia and Queensland.

The acquisition will expand GWI's rail operations in the U.K., continental Europe and Australia, GWI officials said in a press release.

The deal is a strategic fit for GWI because the company gains a world-class intermodal and heavy haul franchise in the United Kingdom that will be the foundation of a European Region; overlaps its respective rail businesses in Australia and the Netherlands to unlock operating synergies and expand its presence in those markets; and obtains a highly talented management team with a long track record of success in building Freightliner over the past two decades, said GWI President and Chief Executive Officer Jack Hellmann.

"Working together, we expect to build the existing business and also unlock a range of attractive rail investment opportunities worldwide," he said.

After the acquisition is completed, GWI essentially will comprise three parts: traditional North American short-line and regional railroad operations, Australian operations and European operations, said Hellmann. North American operations are expected to contribute about 77 percent of annual operating income, and the company will continue to execute a long-term plan of commercial growth across its North American rail footprint and grow via acquisitions spurred by further consolidation of the short-line industry, he said.

GWI plans to finance the Freightliner acquisition through an amendment to its existing credit facility, with about $650 million generated by the issuance of new term loans and the remainder drawn from an existing revolver.

"GWI brings additional investment firepower, extended international reach and increased rail infrastructure expertise to add to [our] existing strengths," said Freighliner Group CEO Russell Mears.



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