Carl Icahn Rides Cargo Boom to $1.34 Billion Sale of Train-Car Maker

(Bloomberg) -- Billionaire investor Carl Icahn agreed to sell American Railcar Industries Inc. for $1.34 billion, quintupling his investment as a freight boom spurs a rebound in demand for rail equipment.

Icahn Enterprises agreed to sell the maker of tank and hopper cars at $70 a share, 51 percent above its closing price on Oct. 19, to a subsidiary of hedge fund ITE Management LP. The deal is valued at $1.75 billion including debt, Saint Charles, Missouri-based American Railcar said in a statement Monday.

Carl Icahn Rides Cargo Boom to $1.34 Billion Sale of Train-Car Maker

Rail carloads are climbing as the robust U.S. economy drives freight demand and a shortage of truck drivers pushes some cargo to trains. Orders for freight cars jumped 35 percent to 23,788 in the second quarter from a year earlier, according to the Railway Supply Institute. It was the biggest quarter for rail-car orders since the end of 2014.

Icahn’s sale marks a retreat from a previous attempt to consolidate the rail-equipment industry after he acquired a majority interest in American Railcar in 2010.

He took a 10 percent stake in Greenbrier Cos. in 2012 and began negotiations for American Railcar to buy the competitor. Greenbrier rejected several offers, and Icahn eventually walked away. His investment vehicle agreed to sell its interest in American Railcar’s leasing operation almost two years ago to Sumitomo Mitsui Banking Corp. in a deal valued at $3.4 billion.

Carl Icahn Rides Cargo Boom to $1.34 Billion Sale of Train-Car Maker

Icahn Enterprises said the investment in American Railcar has generated a total return of 423%. He stepped down as chairman of the company in 2014.

Full Circle

Monday’s deal meanwhile puts American Railcar back in the hands of ITE partner Jim Unger. He founded American Railcar, was chief executive officer for 14 years until 2009 and left the following year as executive vice chairman.

Unger’s willingness to pay such a high premium will probably give a boost to other rail-equipment makers, including Greenbrier and Trinity Industries Inc., said Bascome Majors, an analyst at Susquehanna Financial Group.

The deal is seen “as a constructive signal toward both valuation of publicly traded peers and the buyers’ view of the rail-car cycle,” Majors said in a note to investors.

American Railcar jumped 51 percent to $69.72 at 11:02 a.m. in New York, the most intraday since the shares began trading in 2006. Greenbrier climbed 4.8 percent, and Trinity advanced 4.4 percent. American Railcar had gained 11 percent this year through Oct. 19, while the Russell 3000 Railroad Equipment index climbed 6.7 percent.

The purchase is expected to close this quarter, subject to customary conditions.

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