Genesee & Wyoming Inc. (GWI) (NYSE: GWR) announced today that it has
signed an agreement to acquire CAGY Industries, Inc. (CAGY) for
approximately $78.4 million in cash. The final purchase price will be
adjusted for working capital at the time of closing. In addition, GWI
has agreed to pay contingent consideration of up to $18.6 million upon
satisfaction of certain conditions over the next two years. The
acquisition is subject to customary closing conditions, including the
expiration of the 30-day notice period required by the Surface
Transportation Board for GWI to obtain authority to control CAGY. GWI
expects to close the acquisition and commence operations on June 1, 2008.
Founded in 1975 and headquartered in Columbus, Miss., CAGY is the parent
company of three short-line railroads, Columbus & Greenville Railway
(C&G), Chattooga & Chickamauga Railway (CCKY) and Luxapalila Valley
Railroad (LXVR). CAGY's three railroads employ 48 people, own and
operate a fleet of 22 locomotives, own and lease more than 280 miles of
track and are expected to haul more than 26,000 carloads of freight
traffic over the next 12 months.
(Photo: http://www.newscom.com/cgi-bin/prnh/20080429/NYTU045)
C&G operates more than 80 miles in the state of Mississippi, from the
Port of Greenville on the Mississippi River to Greenwood, where it
interchanges with Canadian National. C&G also operates between Columbus,
Miss., and West Point, Miss. In addition, C&G operates throughout the
Columbus, Miss., area and provides connections to Norfolk Southern,
Kansas City Southern, CSXT, BNSF, Alabama & Gulf Coast Railway and
Golden Triangle Railroad, as well as LXVR, its sister railroad.
Customers of C&G include (i) major feed suppliers to the catfish and
pork industries, including Delta Western, Fishbelt Feeds and Prestage
Farms, (ii) major milling operations in the rice industry, including
Producers Rice and MasterFoods, (iii) several facilities serving the
agriculture industry including PYCO Industries, ConAgra, Farmer's Grain
and Platte Chemical, and (iv) other customers including USG Corporation,
Columbus Brick and a new Scott Petroleum bio-diesel plant. In addition,
C&G is one of two railroads that serve the new $850-million SeverCorr
electric arc furnace (EAF) steel facility in Columbus, Miss., which is
100-percent-owned by Severstal. SeverCorr commenced production in the
second half of 2007 and is expected to complete an expansion in 2010
that would increase annual capacity from 1.5 million tons to 3.0 million
tons.
LXVR runs 36 miles from Columbus, Miss., to Belk, Ala., and serves both
Georgia-Pacific and Weyerhaeuser lumber mills and SDR, a new steel dust
recycling facility. CCKY operates over two branch lines that run south
from Chattanooga, Tenn., for a combined 65 miles to Hedges, Ga., and
Lyerly, Ga. CCKY serves both Reichhold Chemical (subsidiary of Dow
Chemical) and Shaw Industries (subsidiary of Berkshire Hathaway).
"Over the past three decades, CAGY has built an impressive short-line
railroad organization," GWI Chief Executive Officer John C. Hellmann
said. "With the support of local communities, customers and employees,
CAGY has succeeded in revitalizing its rail infrastructure and
substantially increasing rail traffic. The addition of CAGY to GWI will
expand our already significant presence in the southeastern United
States and further diversify our commodity base. We are pleased that
Roger Bell, who has been the architect of CAGY's success as president
and CEO, will continue to lead the rail operations as part of the GWI
family of railroads."
GWI expects to fund the acquisition under its $225-million senior
revolving credit facility. Following the acquisition, GWI will have
approximately $117 million of remaining funding capacity, inclusive of
cash. As of March 31, 2008, pro forma for the acquisition, GWI's
consolidated net debt to capitalization is expected to be approximately
43 percent including contingent consideration with net debt to pro forma
EBITDA of approximately 2.4x. GWI expects the acquisition to be
immediately accretive to its earnings per share and free cash flow.
GWI owns and operates short line and regional freight railroads in the
United States, Canada, Australia and the Netherlands and owns a minority
interest in a railroad in Bolivia. Operations currently include 48
railroads organized in eight regions, with more than 5,700 miles of
owned and leased track and approximately 3,000 additional miles under
track access arrangements. GWI provides rail service at 16 ports in
North America and Europe and performs contract coal loading and railcar
switching for industrial customers.
Cautionary Statement Concerning Forward-Looking Statements
This press release contains forward-looking statements regarding future
events and the future performance that involve risks and uncertainties
that could cause actual results to differ materially from its current
expectations including, but not limited to, the consummation of the
proposed acquisition transaction; economic, political and industry
conditions; customer demand, retention and contract continuation;
legislative and regulatory developments; increased competition in
relevant markets; funding needs and financing sources; susceptibility to
various legal claims and lawsuits; strikes or work stoppages; severe
weather conditions and other natural occurrences; and others. Words such
as "anticipates," "intends," "plans," "believes," "seeks," "expects,"
"estimates," variations of these words and similar expressions are
intended to identify these forward-looking statements. GWI refers you to
the documents that it files from time to time with the Securities and
Exchange Commission, such as GWI's Forms 10-Q and 10-K which contain
additional important factors that could cause its actual results to
differ from its current expectations and from the forward-looking
statements contained in this press release. GWI disclaims any intention
to update the current expectations or forward looking statements
contained in this press release.
Genesee & Wyoming Inc.
Michael E. Williams, 203-629-3722
Director, Corporate Communications
http://www.gwrr.com