Brookfield and GIC to buy Genesee & Wyoming for $6.4bn

September 2019 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

September 2019 Issue

In a transaction valued at approximately $6.4bn, including debt, railroad operator Genesee & Wyoming (G&W) Inc is to be acquired by a private equity (PE) consortium consisting of Brookfield Infrastructure and its institutional partners, and Singaporean sovereign wealth fund GIC.

Under the terms of the agreement, each issued and outstanding share of G&W will be converted into the right to receive $112 per share in cash. Brookfield’s investment will be approximately $500m of equity. The remainder of the business will be owned by Brookfield Infrastructure’s institutional partners and GIC. Brookfield’s investment will be funded from existing liquidity.

Once complete, the transaction will result in G&W becoming a privately held company. Under the new ownership, G&W will continue to focus on world class safety and outstanding service, while pursuing the company’s strategic goals.

“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, which are integral to the local economies that we serve in North America and around the world,” said Jack Hellmann, chairman and chief executive of G&W. “They are also fully supportive of our business plan, which will continue to be focused on safety, customer service and growing our footprint to provide more opportunity for our people.”

With a portfolio of 120 short line railroads, predominantly in North America, and operations in Europe and Australia, G&W provides essential transportation infrastructure services over more than 26,000 kilometres of track, providing access to its well-diversified customer base.

“This is a rare opportunity to acquire a large-scale transport infrastructure business in North America,” said Sam Pollock, chief executive of Brookfield Infrastructure. “G&W will be a significant addition to our global rail platform and will expand our presence in this sector to four continents. G&W provides critical transportation services to more than 3000 customers, and its cash flows have proven to be highly resilient over many years. Brookfield Infrastructure is well suited to work with the company to continue to improve the business, given our significant experience owning and operating rail, ports and other large scale, transportation infrastructure businesses.”

Serving as financial adviser to the consortium are Citigroup Global Markets Inc. White & Case LLP is serving as lead legal adviser, along with McCarthy Tétrault LLP, Gilbert + Tobin and Steptoe & Johnson LLP, which are also serving as legal advisers.

Torys LLP is serving as legal adviser to Brookfield Infrastructure and Sidley Austin LLP is serving as legal adviser to GIC. Financing for the consortium is being led by a syndicate of banks including Credit Suisse, Wells Fargo Securities, LLC, Citigroup Global Markets Inc and RBC Capital Markets.

Serving as financial advisers to G&W is BofA Merrill Lynch and Morgan Stanley & Co LLC. Simpson Thacher & Bartlett LLP, as well as Addleshaw Goodard LLP, Allens, Clark Hill PLC, Macfarlanes LLP and Stikeman Elliott LLP, are serving as legal advisers. In addition, Wachtell, Lipton, Rosen & Katz are serving as counsel to G&W’s board of directors.

The transaction is expected to close by year end or early 2020 and is subject to customary closing conditions, including approval by G&W stockholders holding two-thirds of the outstanding common stock. Regulatory approvals are required by the Committee on Foreign Investment in the US, the US Surface Transportation Board, and certain competition and antitrust regulators.

Mr Hellmann concluded: “We believe this transaction will allow us to further enhance our business as we benefit from Brookfield Infrastructure and GIC’s expertise in real estate and technology, as well as relationships with their rail-centric and complementary portfolio companies.”

Fraser Tennant