Genesee & Wyoming Australia to acquire Glencore Rail

Genesee & Wyoming Australia (GWA) has entered into agreements to acquire Glencore Rail (GRail) for 1.14 billion in Australian dollars, and concurrently issue a 49 percent equity stake in GWA to funds managed by Macquarie Infrastructure and Real Assets (MIRA).

The acquisition will strengthen GWA's footprint in Australia by adding a "significant presence" in the Hunter Valley coal supply chain in New South Wales, complementing GWA's intermodal, agricultural and mining business in South Australia and the Northern Territory, said officials from GWA parent Genesee & Wyoming Inc. (G&W) in a press release.

The acquisition will create a partnership consisting of GWA (51 percent) and MIRA (49 percent), with an enterprise value of A$2 billion.

The transaction is expected to close Dec. 1, subject to the Australian Foreign Investment Review Board's approval.

"Through the acquisition and 49 percent new equity issued to MIRA, we are effectively doubling the size of GWA and retaining 51 percent of a business with stronger long-term free cash flow and a significant portion of GWA’s rail shipments under long-term, take-or-pay contracts," said G&W President and Chief Executive Officer Jack Hellmann.

The arrangement will enhance the company’s existing relationship with Glencore "through a two-decade rail haulage contract that provides for exclusive rights to rail shipments from some of the premier steam coal mines in the world, serving end users in Japan, South Korea, Taiwan and Southeast Asia," he added.

"Furthermore, we believe that our partnership with a world class Australian infrastructure investor in MIRA will enable us to leverage our rail platform for extensive future growth within Australia," Hellmann said.

For MIRA, the agreement will expand its infrastructure footprint in Australia and "allows us to contribute our international experience investing and managing transport and transport services assets," said Frank Kwok, Asia-Pacific co-head of MIRA.