(RailAmerica issued the following news release on November 26.)
BOCA RATON, Fla. — RailAmerica, Inc. announced that it has entered into an agreement to acquire the assets of the Bay City, Michigan-based Central Michigan Railway Company (CMGN). CMGN, which operates 100 miles of track from Midland, Michigan, south to Durand, Michigan, moved approximately 30,000 carloads and had revenue of approximately $11 million in 2002. The transaction, which is subject to regulatory approval and other customary closing conditions, is expected to be completed within 60 days.
With five existing RailAmerica railroads within a 90-mile radius of CMGN, the Company anticipates deriving further synergies and cost savings from its Michigan cluster of rail operations. CMGN also has a direct connection with RailAmerica’s Huron & Eastern Railway (HESR) and Saginaw Valley Railway (SGVY) railroads.
CMGN provides rail freight service to the Saginaw area in Michigan’s ‘Thumb’ region and interchanges traffic with Canadian National, CSXT, Lake State Railway Company and the Tuscola & Saginaw Bay Railway, in addition to HESR and SGVY. Major shippers on CMGN include Dow Chemical and Consumers Energy. Commodities moved on CMGN include agricultural commodities, lumber, automotive parts, heavy machinery, chemicals, sugar beets, fertilizer, military hardware, fuels, stone, cement and coal. CMGN also has cross-dock, warehouse and transload facilities. Established in 1987, CMGN employs 43 people and is owned and operated by The Straits Corporation.
Gary O. Marino, Chairman, President & CEO of RailAmerica, said: “With Central Michigan’s strong operational performance and excellent free cash flow, we expect that it will be immediately accretive to RailAmerica’s earnings. This transaction represents a compelling growth opportunity for Central Michigan and RailAmerica’s other Michigan railroads as we expect to derive significant benefits from operating CMGN within our Michigan cluster of railroads. Once this transaction is consummated, we will have six railroads in Michigan operating approximately 500 miles of rail line. The acquisition will double our freight carloads in the state to over 60,000 annually and will further solidify RailAmerica’s presence in Michigan, where our flagship operation, the Huron & Eastern railroad, commenced rail service in 1986.”
C. A. Pinkerton, President of The Straits Corporation, added: “The purchase of Central Michigan by RailAmerica will assure the continued growth of the company by combining the strong financial strength of RailAmerica with the solid operating performance of Central Michigan. The Central Michigan Railway has enjoyed continued growth since its inception in 1987 due to its diversified and strong customer base, and talented and loyal work force. This acquisition will have a positive influence on all concerned and will allow the company to continue to grow and take advantage of opportunities within the industry, making for a stronger and more competitive company. I look forward to seeing the next chapter of growth within the Central Michigan Railway.”
RailAmerica, Inc. (NYSE:RRA) is the world’s largest short line and regional railroad operator with 49 railroads operating approximately 17,700 miles in the United States, Canada, Australia, Chile and Argentina, including track access arrangements. The Company is a member of the Russell 2000(R) Index. Its website may be found at http://www.railamerica.com.