Watco positions itself for growth with major investment partner NEWSWIRE

PITTSBURG, Kansas – Watco Cos. has formed a strategic partnership with an investment firm that will provide up to $450 million in capital. Officials with the Kansas-based short line operator says the partnership with Oaktree Capital Management will position the company to grow in the coming years and, possibly, acquire more railroads.

Ed McGuire, chief investment officer for Watco, tells Trains News Wire that the company wants to be ready to buy should any lucrative operations come on the market.

“Watco is a growing company,” McGuire says. “This capital will allow us to move quickly and get deals done.”

As part of the deal, Oaktree will become a minority shareholder in the company and two of their executives – former Kansas City Southern CEO Dave Starling and portfolio manager Josh Connor – will join Watco’s board of managers. The Webb family will retain the majority of the company.

“We are thrilled to announce this innovative strategic growth partnership and are excited for Oaktree to become a part of the Watco family,” Watco CEO Dan Smith says in a news release announcing the deal “Oaktree brings much more than just capital to Watco. Oaktree brings its specialized team of transportation experts, a strong understanding of the sectors in which we operate, deep industry relationships, and years of investment experience – all critical things that we were looking for in a long-term strategic partner.”

While Watco has done similar deals with investment firms in the past, McGuire says the recently announced partnership with Oaktree is by far the largest. McGuire says while some of the funds may go toward expansion, Watco also wants to reinvest in what it already has. Watco owns 41 shortline railroads that operate on more than 5,000 miles of track.

McGuire says the past few years have been “busy” ones in the rail industry and he expects that more routes will be coming on the market, especially as Class 1 railroads look to thin their mileage. Just last year, Watco took over two former CSX Transportation routes in Illinois and Indiana.

Oaktree’s co-portfolio manager Emmett McCann says the investment-firm is excited about expanding into rail.

“This partnership represents an opportunity for Oaktree to work alongside Watco, which we view as a tremendous transportation business, operating in the attractive freight rail sector, with a phenomenal culture, the right values, and exciting growth opportunities ahead of it. We are proud to be able support the Watco Team as they build for the future,” he says.