Genesee & Wyoming, Inc. (GWR - Free Report) is set to be acquired by Brookfield Infrastructure Partners LP (BIP - Free Report) and GIC in a cash and debt deal valued at $8.4 billion. As the news broke, shares of the company started rising and closed yesterday’s trading session 8.8% higher.
While Brookfield Infrastructure Partners is a Canada-based global infrastructure company operating high-quality, long-life assets, GIC is a Singapore-based sovereign wealth fund.
Once purchased, Genesee & Wyoming will become a privately held company. However, it will carry on with its usual operations, focusing on high-quality safety, premium service and strategic goals.
Per the agreement, shareholders of the company will receive $112 per share in cash, representing a premium of 39.5% to the Mar 8 share price (the day before speculations of a possible transaction began) for the current shareholders. For long-term investors holding the company’s shares since the past two decades, the sale price means a return of more than 5,400%.
Banking on Brookfield Infrastructure and GIC’s experience in real estate and technology as well as their connections with rail-related portfolio companies, Genesee & Wyoming should be able to strengthen its business through the buyout.
The company will receive $500-million equity investment from Brookfield Infrastructure. The remainder of the company will be owned by Brookfield Infrastructure’s institutional partners and GIC.
Subject to closing conditions, regulatory and stockholders’ approval, the deal is expected to close by year-end or early 2020.
With the transaction process underway, the company will not release monthly carloads. Neither will it hold its second-quarter earnings conference call. The company is anticipated to file 10-Q for the same on Aug 9.
Zacks Rank & Key Picks
Genesee & Wyoming carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader Transportation sector are Canadian Pacific Railway Limited (CP - Free Report) and Fly Leasing Limited (FLY - Free Report) , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of Canadian Pacific and Fly Leasing have rallied more than 33% and 24%, respectively, in a year.
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