INTERNATIONAL: A consortium of Brookfield Infrastructure, GIC and Brookfield’s institutional partners has agreed to acquire short line group Genesee & Wyoming Inc in a US$8·4bn transaction.

The consortium would pay US$112 per share in cash, with G&W becoming a privately held company.

‘We believe this transaction is an excellent outcome for all G&W stakeholders’, said G&W Chairman & CEO Jack Hellmann when the deal was announced on July 1. ‘For our current stockholders, the sale price realises significant value and represents a 39·5% premium to our March 8 share price. And for long-term investors who have owned our shares for the past two decades, the sale price represents a return of more than 5 400%.’

‘Rare opportunity’

G&W operates around 120 short lines totalling more than 26 000 km, mainly in North America but including operations in Europe and Australia. These include UK freight operator Freightliner, and a 51·1% stake in a joint venture with funds managed by Macquarie which operates Australian routes including the Tarcoola – Darwin line.

Hellmann said ‘the long-term investment horizon of Brookfield Infrastructure and GIC as seasoned infrastructure investors is perfectly aligned with the long lives of G&W railroad assets’. He said the business would benefit from the future owners’ expertise in property and technology and with complementary companies.

New York and Toronto listed global investor Brookfield Infrastructure has around 10 300 km of railways in Australia and Brazil. CEO Sam Pollock said the G&W deal was ‘a rare opportunity to acquire a large-scale transport infrastructure business in North America’, with more than 3 000 customers and cash flows which ‘have proven to be highly resilient over many years’.

GIC Chief Investment Officer for Infrastructure Ang Eng Seng said Singapore’s foreign reserve investor was ‘confident G&W will continue to generate steady profitability, given its diversified operations and customer base.’

Financial details

The transaction is expected to close by early 2020, subject to approval by G&W shareholders holding two-thirds of the outstanding common stock, and approval by the Committee on Foreign Investment in the United States, the USA’s Surface Transportation Board and competition authorities.

Brookfield Infrastructure’s investment will be approximately US$500m of equity, to be funded from existing liquidity. The remainder of the business will be owned by its institutional partners and GIC. Financing for the consortium will be led by a syndicate of banks including Credit Suisse, Wells Fargo Securities, Citigroup Global Markets and RBC Capital Markets.

Citigroup Global Markets is serving as financial adviser to the consortium, with White & Case as lead legal adviser along with McCarthy Tétrault, Gilbert+Tobin and Steptoe & Johnson. Torys is legal adviser to Brookfield Infrastructure and Sidley Austin to GIC.

BofA Merrill Lynch and Morgan Stanley & Co served as financial advisers to G&W, with Simpson Thacher & Bartlett, Addleshaw Goodard, Allens, Clark Hill, Macfarlanes and Stikeman Elliott as legal advisers. Wachtell, Lipton, Rosen & Katz served as counsel to the G&W board.