* Infrastructure, Canadian pension funds also
* RailAmerica auction well into second round-sources
* Company said in May it hired DB to consider sale
By Soyoung Kim and Greg Roumeliotis
NEW YORK, July 2 Regional railroad operator
RailAmerica Inc has attracted takeover interest from
rival transportation companies Genesee & Wyoming Inc and
Watco Companies LLC, according to people familiar with the
Several infrastructure funds and Canadian pension funds
active in infrastructure investments are also evaluating bids
for RailAmerica, which has a market value of more than $1.2
billion, the people said.
The Jacksonville, Florida-based company, which is majority
owned by Fortress Investment Group, said in May it has
hired Deutsche Bank to consider a sale and was in
preliminary talks with potential buyers.
The interested parties had submitted initial bids several
weeks ago and the sale process is well into the second round,
according to the sources, who asked not to be named because
details of the process are confidential.
Private equity firms, which typically seek higher returns on
investments than infrastructure funds, have shown little
interest in a deal, they said.
Greenwich, Conneticut-based Genesee & Wyoming, which has a
market value of roughly $3 billion, owns and operates short line
and regional freight railroads and provides railcar switching
services in the United States, Canada, Australia as well as in
some European countries.
Genesee & Wyoming trades at 11 times 12-month forward
earnings before interest, tax, depreciation and amortization,
while RailAmerica trades at 8.8 times, according to Thomson
Reuters Starmine. RailAmerica's shares reached an all-time high
on Friday of $24.73.
Pittsburg, Kansas-based Watco, another transportation
company interested in buying RailAmerica, operates 27 shortline
railroads in the United States and Australia.
RailAmerica and Genesee & Wyoming did not return calls for
comment, while Fortress, Watco and Deutsche Bank declined to
The U.S. rail infrastructure sector has not seen major deal
activity since Warren Buffett's $26.5 billion acquisition of
Burlington Northern Santa Fe Railway in 2010.
RailAmerica is a fraction of that size and operates short
line and regional freight railroads. It owns about 45 individual
railroads with about 7,500 miles of track in the United States
Fortress acquired RailAmerica in 2007 and took it public in
2009. It owns a 60 percent stake in the company.
Shares of RailAmerica rose 1.8 percent to $24.64 on the New
York Stock Exchange on Monday. The stock has risen 11 percent
since the company announced strategic alternatives, including a
possible sale, on May 22.