Brookfield Infra, GIC team up in $6.4bn railroad deal

Brookfield Infrastructure Partners and Singapore’s sovereign wealth fund GIC have agreed to purchase North American freight railroad owner Genesee & Wyoming in a deal valued at $8.4 billion including debt.

The two firms offered $112 per share – or approximately $6.4 billion in cash – for Connecticut-based G&W in a take-private deal that represents a 39.5 percent premium to the railroad company’s $80.28 stock price as of 8 March 2019, the day before media reports emerged about a possible sale, Brookfield said.

The Toronto-based infrastructure fund manager said it is investing $500 million of equity from existing liquidity, while the remainder of G&W will be owned by GIC and Brookfield Infrastructure’s institutional partners. It was unclear if the latter was in reference to LPs that have co-investment arrangements in place with Brookfield or have committed to the fund manager’s infrastructure vehicles. The firm did not respond to a request for comment.

However, according to a 1 July filing with the Securities & Exchange Commission, Brookfield will provide $4.0 billion in equity financing through Brookfield Infrastructure Fund IV, the latest vehicle for which its parent, Brookfield Asset Management, is currently raising capital. GIC will provide $1.5 billion in equity through Lisson Grove Investment Pte.

According to the same filing, Credit Suisse, Wells Fargo, Citigroup Global Markets and RBC Capital Markets will provide debt financing of $3.15 billion, consisting of a $600 million senior secured revolving credit facility and $2.55 billion of senior secured term loans.

The G&W acquisition gives the partners a “North American rail business with significant scale”, including 26,000 kilometres of freight rail lines, mostly in the US and Canada, the statement said. All but four of G&W’s 120 rail lines are in North America, but its portfolio includes assets in Australia, continental Europe and the UK.

Two-thirds of G&W’s shareholders must approve the transaction, which also has to receive regulatory clearance from federal agencies, including the Committee on Foreign Investments in the United States and the US Surface Transportation Board.

G&W chairman and chief executive Jack Hellmann said Brookfield and GIC’s interests “perfectly aligned with the long lives of the railroad assets”.

Brookfield Infrastructure’s chief executive Sam Pollock added that the deal is a “significant addition” to its global rail platform.

“As a long-term investor, GIC is confident G&W will continue to generate steady profitability, given its diversified operations and customer base,” Ang Eng Seng, GIC’s chief investment officer for infrastructure, said.