Carlyle cash to bolster $2bn rail bid

Alternative assets firm The Carlyle Group is investing $800m in Genesee & Wyoming. The money will help the railway operator with its $2bn purchase of RailAmerica.

A large capital infusion from Washington, D.C-based alternative assets firm The Carlyle Group will help Genesee & Wyoming Incorporated (GWI) pull off a $2 billion acquisition of RailAmerica, Carlyle said.

The firm will put $800 million into GWI, enabling the company to buy RailAmerica for $2 billion, or $27.50 a share. The investment will come out of the $13.7 billion Carlyle Partners V buyout fund, with financing coming from Bank of America Merrill Lynch.

The transaction is subject to customary closing conditions and regulatory approval and is expected to close in the fourth quarter of 2012.

GWI chief executive Jack Hellman in a statement said his company went ahead with the transaction in order to benefit from an eventual rebound by the rail line business. Genesee & Wyoming a month ago reported a 10.6 percent decrease in volume.

GWI’s acquisition of RailAmerica will combine the two largest short line and regional rail operators in North America. It will now operate 108 railroads over more than 12,000 track miles. The transaction increases GWI’s total revenues by nearly two-thirds to approximately $1.4 billion (2011) and doubles North American revenue to approximately $1.1 billion (2011).

Following the transaction, GWI will have 111 railroads (108 in North America), 15,120 miles of track (12,300 in North America), 1.9 million carloads (1.7 million in North America), 1,000 locomotives (900 in North America) and 4,300 employees (3,900 in North America).

A year prior, GWI made another significant deal, purchasing Eastern Arizona Railway.

In July, Carlyle formed a joint venture with Sunoco to form Philadelphia Energy Solutions established to save a failing historic East Coast oil refinery.

Carlyle said its deal with GWI is expected to close by the autumn.