Business

Genesee & Wyoming railroad grows again

The Genesee & Wyoming Railroad, once a 14 mile short line confined exclusively within Livingston County, has grown by leaps and bounds during the past 27 years, acquiring in wholesale fashion other rail lines throughout North America and overseas.

On Monday the Genesee & Wyoming holding company announced its largest acquisition to date, RailAmerica, Inc.

The $1.39 billion deal will combine the two largest short line/regional rail operators in North America.

RailAmerica, with headquarters in Jacksonville, Fla., is controlled by, and being purchased from, the Fortress Investment Group.

As the next-largest owner and operator of short line and regional freight railroads on the continent, RailAmerica has 45 individual railroads on 7,500 miles of track in 28 U.S. states and three Canadian provinces. Last year RailAmerica lines transported 840,000 carloads of freight for over 1,500 customers.

These figures compare with Genesee & Wyoming’s own totals of 63 individual railroads on 9,000 miles of owned, leased or accessed track in 24 U.S. states and four foreign countries (Canada, Australia, the Netherlands and Belgium).

In 2011 Genesee & Wyoming transported nearly 1 million carloads of freight for about 800 customers.

After the purchase and merger, which still await formal approval from the federal Surface Transportation Board, Genesee & Wyoming will have 4,300 employees. Seventy percent of the new company’s revenue will be derived in the United States.

Analysts report that, in realizing the merger, Genesee & Wyoming will be refinancing existing debt with about $2 billion in new debt and $800 million in equity or equity-linked securities.

Business will be more healthily diversified so that no single customer will represent more than three percent of company revenue and no single commodity will be more than 16 percent of company revenue.

The price of RailAmerica is about 10.5 times the company’s annual earnings before interest, taxes, depreciation, and amortization — almost 11 percent more than the July 20 closing stock price, and almost 28 percent higher than the stock price on May 21, the last trading day. However, knowledgeable analysts do not see Genesee & Wyoming over-levering to do the transaction.

A history of growth

Formed in 1891 as the Genesee & Wyoming Valley Railway, the name was shortened to the Genesee & Wyoming Railroad in 1899, when the company was purchased by Edward L. Fuller. Then and today, its principal job has been the transportation of rock salt from mine to interchange with major rail connections.

The original railroad ran 11 miles from Retsof and Sterling to a connection at Pittsburgh & Lehigh Junction — located just outside Caledonia — with the Lehigh Valley; Buffalo Rochester & Pittsburgh (later Baltimore & Ohio), Erie, and New York Central railroads. There were shorter spur connections to the west at Greigsville with the Lackawanna Railroad and to the east at Cuylerville with the Pennsylvania Railroad.

Today the connections are with CSX at Rochester and Norfolk Southern at Silver Springs via the Genesee & Wyoming-owned Rochester & Southern Railroad (formerly the Baltimore & Ohio) from P. & L. Junction.

Before the new era of growth, the Genesee & Wyoming prospered for eight decades under Fuller family management. Indeed, on a per mile basis, the historic G. & W. was reputed to be one of the most profitable railroads in America.

In 1980 the Staggers Act deregulated the railroad industry and opened the door for major railroad corporations to sell or lease their less profitable branch lines as a viable alternative to abandonment. Companies with short line operating experience, such as Genesee & Wyoming, were eager to step in.

Between 1985 and 1988, Genesee & Wyoming became a major leaser of rail cars and also acquired the neighboring Dansville & Mount Morris Railroad (including the former Lackwanna connection between Greigsville and Groveland Station), former Baltimore and Ohio lines renamed the Rochester & Southern and Buffalo & Pittsburgh, and, in the deep south, the Louisiana & Delta Railroad.

Six more railroads had been acquired by 1996 when G&W became a publicly traded stock. Between 1996 and 2000, there were acquisitions in foreign countries. The past decade has seen the acquisition of another dozen-or-so systems, mostly in the United States.

Meanwhile, the original G&W survived the 1994 closure of the Akzo Retsof salt mine and is today profitably hauling freight cars from the new American Rock Salt mine at Hampton Corners.

The trademark G&W orange paint scheme with black horizontal stripes and “double arrow” logo, once unique to a small roster of locomotives in Livingston County, is today commonplace on locomotives throughout North America, Australia and Europe.