Rochester Business Journal

Genesee & Wyoming Inc. said Monday it has entered into an agreement to acquire RailAmerica Inc. for $1.4 billion, or $27.50 a share.

The deal, which is subject to the approval of the U.S. Surface Transportation Board, would combine the two largest short-line railroad companies in North America. The deal would add 45 railroads to GWI’s operations, bringing its total to 108 in North America.

The deal could give the company a 10 percent earnings boost in 2013, GWI said.

“We believe that this footprint not only provides us with a strong leverage to an eventual recovery of the U.S. economy but also creates a powerful platform for the future industrial development along railroads in the 37 U.S. states in which we will do business,” said Jack Hellmann, president and CEO, in a statement.

GWI officials said the company plans to fund the deal and refinance its existing debt by adding $2 billion of new debt and approximately $800 million of equity or equity-linked securities. The company said it has received $2.3 billion of committed debt financing from Bank of America Merrill Lynch and $800 million of committed equity financing from Carlyle Group.

Using the previously reported results of GWI and RailAmerica, the transaction would increase GWI’s total revenues by nearly two-thirds to approximately $1.4 billion and doubles North American revenue to approximately $1.1 billion. Following the transaction, GWI would have 4,300 employees, including 3,900 in North America.

The deal already has prompted several lawsuits claiming the board of directors at RailAmerica breached its fiduciary duties to stockholders by failing to shop the company and, thus, underselling to GWI.

GWI said the purchase price of $27.50 a share represents a premium of more than 10 percent over the closing stock price of RailAmerica shares on Friday.

In a statement about its investigation, law firm Levi & Korinsky LLP said at least one industry analyst had a target price set at $28 a share.

GWI shares (NYSE: GWR) were trading early afternoon Monday at $56.06 a share, up 8 cents from Friday’s close.

Connecticut-based GWI, which has its administrative base in Rochester, owns and operates short-line and regional freight railroads in the United States, Canada, the Netherlands and Australia.

RailAmerica is based in Jacksonville, Fla.

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