UK Rail Freight and Intermodal Specialist Bought by US Railroad Group

US – UK – Britain’s second largest rail freight operator and intermodal specialist, Freightliner, is to be bought by US based Genesee & Wyoming Inc (G&W) which owns short line and regional freight railroads in the United States, Canada, Australia, the Netherlands and Belgium. G&W has entered into an agreement to acquire 95% of the Freightliner Group shares from Shari’ah-aligned investment outfit Arcapita, which has been the majority shareholder since 2008, for a consideration of £490 million (currently $755 million).

Freightliner Ltd, a group subsidiary, is the largest rail maritime intermodal operator in the UK, providing intermodal container services from the major deep sea ports of Felixstowe, Southampton, London Gateway and Tilbury to a network of inland terminals, primarily for global maritime shipping customers. Freightliner operates out of 13 terminals, eight of which are owned, including Birmingham, Bristol, Cardiff (Wales), Coatbridge (Scotland), Doncaster, Leeds, Liverpool and Manchester.

As part of its intermodal service, Freightliner also operates a fleet of over 250 trucks for local pick-up and delivery, providing a fully integrated port-to-door service. In addition, Freightliner’s Heavy Haul subsidiary provides bulk rail freight service throughout the UK, primarily serving the aggregates, cement, coal, and waste industries, and provides infrastructure train services to Network Rail, the UK rail network infrastructure owner.

In Continental Europe, Freightliner Poland primarily serves aggregates and coal customers in Europe’s second largest rail market, and also operates in eastern Germany. In addition, Freightliner’s ERS subsidiary, based in Rotterdam, provides cross-border intermodal services connecting the northern European ports of Rotterdam, Bremerhaven and Hamburg to cities in Germany, Poland, Italy and beyond. In Australia, Freightliner currently transports coal and containerised agricultural products for its customers in New South Wales and is also an accredited rail service provider in Western Australia, South Australia and Queensland.

G&W insists the change of ownership will not have any impact on the day to day operations of the Group and its subsidiaries, with all existing arrangements for each of Freightliner’s operating companies and all staff to remain unaltered. Jack Hellmann, President and Chief Executive Officer of Genesee & Wyoming Inc commented:

“The acquisition of Freightliner is an excellent strategic fit for G&W. We are excited to be adding a world class intermodal and heavy haul franchise in the United Kingdom that will be the foundation of G&W’s European Region. Further, the overlap of our respective rail businesses in Australia and the Netherlands will unlock operating synergies and expand our presence in each of those markets. We are pleased to be joined by a highly talented management team who have a long track record of success in building Freightliner over the past two decades. Working together, we expect to build the existing business and also unlock a range of attractive rail investment opportunities worldwide.

“For Freightliner’s 2,500 employees, we look forward to working together to leverage the strength and skills of our global employee base, deploying best practices from both G&W and Freightliner to enhance the safety and quality of our rail services worldwide. For Freightliner’s customers, we are committed to deliver the same locally focused and responsive rail service that is the hallmark of both Freightliner and G&W, and we are excited about the opportunity to expand our global customer relationships going forward.

“Given the above-rail nature of Freightliner’s operations with limited ownership of track, it is worth noting that G&W’s European segment will have a relatively high operating ratio (approximately 90%) due to its lower capital intensity as well as the prevalence of rolling stock under operating leases.”

Freightliner operates in open access rail freight markets and therefore has limited ownership of track assets. Its fleet of primarily leased equipment includes approximately 250 standard gauge locomotives (mostly diesel-electric) as well as 5,500 wagons, with equipment maintenance provided at its own in-house shops. Russell Mears, Chief Executive Officer of Freightliner Group, observed:

“G&W brings additional investment firepower, extended international reach and increased below rail infrastructure expertise to add to the existing strengths of the Freightliner Group. Their commitment to safety and service quality in all activities mirrors our own values.”