G&W, which operates 120 railroads in North America, Europe, and Australia, is in early talks with potential suitors, including Toronto-based Brookfield Asset Management, Bloomberg reported on Monday.
Neither G&W nor Brookfield responded to Trains requests for comment.
Brookfield Infrastructure Partners has deep pockets and is one of the world’s largest owners of transportation and utility infrastructure, including railroads, ports, and toll roads. The company could easily buy G&W outright if it wanted to, says independent rail analyst Anthony B. Hatch of ABH Consulting.
G&W, whose stock market value is around $4.9 billion, has a history of growth through acquisition of short line and regional railroads. The company did not score any deals in 2018, however, as prices rose and made potential acquisitions unattractive.
“They have said that the same high valuations that make it near impossible for them to continue to buy assets also make their very own assets more valuable,” Hatch says.
G&W executives have said that they would consider finding an investment partner for large acquisitions, Hatch says.
The Carlyle Group, a private equity firm, invested $350 million in G&W in 2012 to help fund G&W’s $2 billion acquisition of RailAmerica, for example.
G&W executives also have said that short line acquisitions are pricey, Hatch notes.
“The expensive deals issue is with valuation and return on investment, for the most part, not overall amount of dollars,” Hatch explains.
Last year, G&W executives said buying back the company’s stock was more attractive than other investment opportunities such as acquiring railroads or other transportation assets.
G&W is not the only company to reach the conclusion that short lines acquisition prices are high.
Fortress Transportation & Infrastructure Investors aims to sell the Central Maine & Quebec this year, CEO Joe Adams told an investor conference last week. Why? Short lines prices are no longer attractive, making future acquisitions unlikely, and the CM&Q is an odd duck as the lone remaining railroad in the company’s portfolio.
Fortress bought the former Montreal, Maine & Atlantic out of bankruptcy in 2014 in the wake of the Lac-Mégantic, Quebec, oil train disaster.
Meantime in the former USSR, on Russian Railways, it’s still Business as Usual providing dedicated Customer Service, Freight and Passenger!
Gee what a cynical anti capitalism set of comments, You’d think that running a railroad was about providing a public service, rather than servicing the stake holders.
Smart move. All railroads should rip up their track and enter the air freight business with a fleet of Boeing Boeing 737 Max aircraft and send the trains to the history books where they belong.
DONE!
Interesting.
CSX puts up a rash of its lines for sale, but no one can/will buy them. And the one who tried had to back out due to financing.
Short line prices at an all time high,(probably because inventory is low) so yes, if I were G&W, I would be selling an equity stake as well.
Buy low, sell high.
If G&W can’t grow with what they have, does this mean they have “tapped” out all the potential earnings in their current inventory?
I suspect that CSX is doing what they always do with marginal lines.
Put em up for sale
Make the terms onerous
Buyer goes all out to meet said terms and fails
CSX says no one wants them and rips them up
I am still surprised that G&W did not buy *any* CSX spin offs.
When a firm that lives by acquisition, and a ton of lines become available and they don’t bid nor buy, means there is more wrong with the seller.
It’s all about the money. Forget about performing a service.
The big railroad should buy it, drive away all the customers, abandoned or sell most of the remaining useless lines to small short-line operators which can then be purchased by a holding company called (hmmm, how about) Wyoming & Genesee Railway. It worked once, it can work again…
Looks like the folks who took over the enterprise after the founders left are looking for a way to cash out, and cash out bigly. At least EHH’s PSR operating philosophy seems to have a modicum of service therein embedded.
Funny, the comments below about not wanting to perform a service but make money…nothing in that article says they don’t want to run the existing railroads. All I read was that it’s becoming prohibitively expensive to acquire new railroad properties and make a decent return on that investment…just the way any normal business works, and that they would be willing to work WITH an investment partner to make NEW acquisitions.
Mr. Klass: Just performing a service without making any money gets you out of business in a hurry. Or worse yet, you become the government.
Does nobody want to run a railroad anymore?
As long as the investor gets a fat return and the managers get a big bonus it’s fine but when you milk the cow dry then you sell off the cow for meat.