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The handwriting might have been on the wall for Emons Transportation Group Inc. after posting dismal first-quarter fiscal-year 2002 (ended Sept. 30) financial results: operating revenues dropped 13.8 percent; operating income, 46.7 percent; and net income, 65.6 percent, compared with first-quarter FY 2001.
Genesee & Wyoming Inc. (GWI) Dec. 3 reached an agreement with Emons to acquire the short-line holding company for $18.5 million cash and $10.9 million in assumed debt. GWI plans to merge Emons with a newly formed subsidiary.
Under agreement terms, GWI would purchase Emons' outstanding stock at $2.50 per share and fund the acquisition through its revolving credit facility.
Emons owns and operates 260-mile St. Lawrence and Atlantic Railroad Co. (SLR) and St. Lawrence and Atlantic Railroad (Quebec) Inc. (SLQ), 40-mile York Railway Co., 40-mile Penn Eastern Rail Lines and a 35-acre Auburn, Maine, intermodal terminal.
Emon's difficult first-quarter FY 2002 might've been exacerbated by the Chapter 11 bankruptcy filing of Pulp & Paper of America — one of SLR's largest customers — which accounted for 9 percent of Emon's $25.4 million FY 2001 revenues.
GWI plans to reduce Emons' operating expenses about $1 million during its first year of operation by absorbing Emons' public-company and administrative costs. GWI, too, would coordinate SLR and SLQ with its existing Quebec operations.
"We believe that the acquisition of Emons will lead to opportunities to enhance our operations in Quebec and Pennsylvania," said GWI Chairman and Chief Executive Officer Mortimer Fuller in a prepared statement.
The merger is subject to Emons' stockholder and regulatory agency approval; the companies expect to close the transaction in first-quarter 2002.
"Our management has worked hard over the past several years to increase revenues and improve the profitability of the company … I look forward to GWI building on those accomplishments," said Emons Chairman, President and CEO Robert Grossman.