Genesee & Wyoming Inc. (G&W) has agreed to acquire the Providence and Worcester Railroad Company (P&W) for $25.00 per share, or approximately $126 million. The acquisition is expected to close following the receipt of P&W shareholder approval in the fourth quarter of 2016, subject to approval by the Surface Transportation Board (STB) and satisfaction of customary closing conditions.
P&W is headquartered in Worcester, Mass., and operates in Rhode Island, Massachusetts, Connecticut and New York. It is contiguous with G&W’s New England Central Railroad (NECR) and Connecticut Southern Railroad (CSO).
“The acquisition of P&W is an excellent strategic fit with G&W’s contiguous railroads, the New England Central and the Connecticut Southern,” said Jack Hellmann, G&W's president and CEO. “Following anticipated STB approval of the acquisition, our connectivity with the P&W enables us to realize substantial immediate cost savings, to share and optimize the utilization of equipment and other assets, and to unlock significant new customer opportunities across sister G&W railroads as well as connecting partners at two Canadian Class I Railroads, two U.S. Class I Railroads and two regional railroads.”
“Our acquisition of the P&W will ultimately enhance the efficiency and customer service of rail in New England,” added Hellmann.
P&W chairman and CEO Robert H. Eder, remarked, “Becoming part of the Genesee & Wyoming family with its record of emphasis on safety and investment in its rail infrastructure ensures that our Company will continue to provide the quality of service which our customers and the communities we serve have enjoyed over the 40 plus years since we re-commenced independent operations while at the same time continuing and improving on our programs to promote employee and community safety.”
P&W rail service is provided by approximately 140 P&W employees with 32 locomotives across 163 miles of owned track and over approximately 350 miles under track access agreements. The railroad serves a diverse mix of aggregates, auto, chemicals, metals and lumber customers in southeastern New England, handling approximately 43,000 carloads and intermodal units annually. In addition, P&W provides rail service to three ports (Providence, Davisville and New Haven) and to a U.S. Customs bonded intermodal terminal in Worcester, Mass.
P&W also owns approximately 45 acres of undeveloped waterfront land in East Providence, R.I., that was initially created as a deep water, rail served port through a $12 million investment. G&W expects to sell this undeveloped land.
Upon approval by the STB, P&W would be managed as part of G&W’s Northeast Region, led by Senior Vice President Dave Ebbrecht.
“We are excited to welcome P&W’s employees to G&W as we work together to provide safe, reliable and efficient rail service to our customers for the long term,” continued Hellmann. “We also look forward to working with our Class I partners, Amtrak and Metro-North Commuter Railroad to ensure a smooth transition of services and build upon the success of P&W’s current operations.”
In the first year of operation, G&W anticipates P&W will generate approximately $35 million of revenue and $12 million of EBITDA, including realization of $8 million of immediate overhead and operational cost savings. In the medium term, G&W anticipates additional operational efficiencies and commercial opportunities will generate a further $5 million of EBITDA realized over the following two to three years.
G&W expects P&W will require approximately $3 million of annual capital expenditures and have a depreciation and amortization expense of approximately $3 million.