Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Why Rail America's Shares Popped

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of regional rail operator RailAmerica (NYSE: RA  ) were choo-chooing ahead today, gaining as much as 10% in intraday trading after Genesee & Wyoming (NYSE: GWR  ) agreed to buy the company.

So what: Genesee agreed to pay $1.4 billion, or $27.50 per share, for RailAmerica. The 11% premium for the buyout may not seem like much, but the price that Genesee is paying is almost 30% above the closing price on May 21, which was the day before RailAmerica announced that it was looking to sell itself.

The deal will put a significant amount of new debt on Genesee's balance sheet as it's gotten $2.3 billion in committed debt financing from Bank of America (NYSE: BAC  ) . It's also secured $800 million in equity financing from private-equity giant Carlyle Group (NYSE: CG  ) .

Now what: The deal here has one financial institution -- Fortress Investment Group (NYSE: FIG  ) , which owned a majority stake in RailAmerica -- getting out of the business, while two others, B of A and Carlyle, are jumping in. What should shareholders do? Since Genesee is doing this as a cash deal, shareholders can easily redeploy their money any way they want. As for riding along with the combined company, while I do like the general thesis around railroads and I dig Genesee's economic bullishness, the amount of debt that the company is taking on could make this a somewhat risky bet.

Want to keep up to date on these stocks?

The Motley Fool owns shares of Bank of America and RailAmerica. Motley Fool newsletter services have recommended buying shares of Genesee & Wyoming. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Matt Koppenheffer owns shares of Bank of America but has no financial interest in any of the other companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter, @KoppTheFool, or on Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1953937, ~/Articles/ArticleHandler.aspx, 10/28/2016 8:43:31 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 11 hours ago Sponsored by:
DOW 18,169.68 -29.65 -0.16%
S&P 500 2,133.04 -6.39 -0.30%
NASD 5,215.97 -34.29 -0.65%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

12/31/1969 7:00 PM
RA.DL2 $0.00 Down +0.00 +0.00%
RailAmerica CAPS Rating: ***
BAC $16.91 Up +0.04 +0.24%
Bank of America CAPS Rating: ****
FIG $5.11 Down -0.06 -1.16%
Fortress Investmen… CAPS Rating: ****
GWR $65.98 Down -0.33 -0.50%
Genesee and Wyomin… CAPS Rating: ****