Add regional Providence & Worcester Railroad Co. (P&W) to Genesee & Wyoming Inc.’s growing stable of Class II and II carriers. GWI announced Aug. 15, 2016 that it plans to acquire the P&W for $126 million at $25.00 per share.
The acquisition is pending the approval of P&W shareholders of common and preferred stock and is set to conclude in fourth-quarter 2016. P&W’s board has approved the acquisition, following completion of a process to assess strategic alternatives. The acquisition must also pass muster with the Surface Transportation Board (STB).
GWI officials predict that P&W could bring in about $35 million in revenue and $12 million of earnings before interest, taxes, depreciation and amortization, including $8 million of operational cost savings and immediate overhead. The company expects to fund the acquisition through its revolving credit facility, which had available capacity of $542 million as of June 30, 2016.
Following anticipated STB approval, P&W would be managed as part of GWI’s Northeast Region, headed by Senior Vice President Dave Ebbrecht. GWI officials say the addition of P&W to its East Coast operations “strengthens GWI’s ability to serve Class I partners and customers in New England, a highly competitive rail market focused on quick, efficient and safe rail service.”
“The acquisition of P&W is an excellent strategic fit with [GWI’s] contiguous railroads, the New England Central (NECR) and the Connecticut Southern,” said GWI President and CEO Jack Hellmann. “Following anticipated STB approval of the acquisition, our connectivity with the P&W enables us to realize substantial immediate cost savings, share and optimize the utilization of equipment and other assets, and unlock significant new customer opportunities across sister [GWI] railroads. We look forward to working with our Class I partners, Amtrak and Metro-North to ensure a smooth transition of services and build upon the success of P&W’s current operations.”
The acquisition would provide GWI connections with the two Canadian Class I railroads (CN and Canadian Pacific), two U.S. Class I’s (CSX and Norfolk Southern) and two regionals (Pan Am Railways and NECR). P&W interchanges with CSX at Worcester, Mass., and New Haven, Conn; with Pan Am at Worcester; with Pan Am Southern LLC and NS at Gardner, Mass.; with NECR and CP at Willimantic, Conn.; with the New York & Atlantic at Fresh Pond Junction, Queens, N.Y.; with Connecticut Southern at Hartford; with CN through trackage rights on NECR over the “Great Eastern Route” at East Alburg, Vt.; and with CP through trackage rights on NECR and Vermont Rail Systems over the Great Eastern Route at Whitehall, N.Y. P&W operates four classification yards in Worcester, Cumberland, R.I., and Plainfield and New Haven, Conn. The Worcester and Plainfield locations are also equipment maintenance facilities.
Approximately 140 P&W employees operate the railroad with 32 locomotives along 163 miles of owned track and 350 miles of trackage rights agreements. P&W also has exclusive freight access on Amtrak’s Northeast Corridor between New Haven, Conn., and Providence, R.I., and trackage rights over Metro-North and Amtrak.
Handling about 43,000 carloads and intermodal units annually, P&W serves a variety of aggregates, auto, chemicals, lumber and metals customers on the East Coast. The railroad also provides rail service at three ports—Providence, Davisville and New Haven, as well as a U.S. Customs bonded intermodal terminal in Worcester. The intermodal terminal accepts inbound intermodal containers for distribution throughout New England.
“Becoming part of the Genesee & Wyoming family with its record of emphasis on safety and investment in its rail infrastructure ensures that our company will continue to provide the quality of service that our customers and the communities we serve have enjoyed during the 40-plus years since we re-commenced independent operations, while at the same time continuing and improving on our programs to promote employee and community safety,” said P&W Chairman and CEO Robert H. Eder.
GWI also plans to sell 45 acres of undeveloped Rhode Island waterfront land in East Providence, which was originally purchased for $12 million by P&W to be a deep-water rail-served port.