Railroad Owner Genesee & Wyoming Is Exploring a Stake Sale

(Bloomberg) -- Genesee & Wyoming Inc., an owner and operator of railroads, is exploring strategic options including the sale of all or part of itself, according to people with knowledge of the matter.

The company is working with a financial adviser and has begun early-stage talks with potential suitors including Brookfield Asset Management Inc. and other infrastructure-investment firms, said the people, who asked not to be identified because the information is private.

Shares of the company, which had climbed 8.5 percent this year through Friday, surged 9 percent to $87.53 at 4:15 p.m., after jumping as much as 11 percent. The gains pushed shares above the $83 average 12-month price target of analysts surveyed by Bloomberg. Shares of other railroads also rose, with Kansas City Southern and Canadian National Railway Co. gaining 3 percent and 1.1 percent, respectively, to their highest level since October.

A Genesee & Wyoming representative didn’t respond to requests for comment, while a Brookfield representative declined to comment.

The Darien, Connecticut-based company, which has 120 railroads and 8,000 employees across North America, Australia, Europe and the U.K., has a market value of about $4.9 billion. After Genesee & Wyoming released financial results last month, analysts at Cowen Inc. and other firms said roughly 20 percent of the company’s North American business could come under volume or price pressure amid softening in the truckload-shipping market. The North American business contributes roughly 85 percent of Genesee & Wyoming’s operating income.

Infrastructure-focused funds have raised a collective $172 billion in so-called dry powder as of Dec. 31, according to Preqin, and they’re increasingly turning to public companies as targets. Blackstone Infrastructure Partners struck a deal for Tallgrass Energy LP in January. That fund and others, including Digital Colony, have also examined offers for Zayo Group Holdings Inc.

Genesee & Wyoming has a history of deals with private investors. In 2012, Carlyle Group LP agreed to invest as much as $800 million in the company to enable it to acquire RailAmerica Inc. In 2016, Genesee & Wyoming bought Glencore Rail and concurrently sold a 49 percent stake in that business to Macquarie Group Ltd.’s Macquarie Infrastructure and Real Assets unit.

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