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The Carlyle Group to invest in Genesee & Wyoming

Alternative asset manager The Carlyle Group has agreed to invest up to USD800m in Genesee & Wyoming Inc (GWI), which will enable GWI to acquire RailAmerica for an all cash purchase price of USD2bn (USD27.50 per share).

Equity for the investment will come from Carlyle Partners V, a USD13.7bn US buyout fund.

Financing will be provided by Bank of America Merrill Lynch. The transaction is subject to customary closing conditions and regulatory approval and is expected to close in the fourth quarter of 2012.

Greg Ledford, Carlyle managing director and head of the transportation and industrial team, says: "We believe this partnership offers strategic benefits and will create significant operational synergies. Carlyle’s industry expertise and global network will help surface acquisition and growth opportunities that will strengthen GWI’s long-term profitability. We look forward to partnering with Jack and his team as we capitalise on these high quality assets and the favourable dynamics of the domestic and global rail industry."

Jack Hellmann, president and chief executive of GWI, says: "This strategic acquisition will create significant shareholder value. Based on our new partnership with Carlyle and the number of additional rail opportunities that we see worldwide, we remain confident in our ability to execute our acquisition and investment strategy to sustain our long term EPS growth. Expanding our footprint provides us with strong leverage to the eventual recovery of the US economy and creates a powerful platform for future domestic and global industrial development. The combination strengthens our ability to offer local, flexible, responsive operations with outstanding customer service."

GWI’s acquisition of RailAmerica will combine the two largest short line and regional rail operators in North America. GWI will now operate 108 railroads over more than 12,000 track miles.

GWI plans to integrate RailAmerica’s 45 railroads into GWI’s eight existing North American Regions and to create two new regions, headquartered in Michigan and Texas, respectively.

RailAmerica’s majority stockholder, RR Acquisition Holding, controlled by Fortress Investment Group, has executed a written consent adopting the merger agreement. No further approval of the stockholders of RailAmerica is required to adopt the merger agreement. However, until the 30th day following the execution of the merger agreement, RailAmerica may terminate the merger agreement to accept a superior proposal, subject to payment to GWI of a termination fee of USD49m.

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