STB Approves Acquisition of G&W

The U.S. Surface Transportation Board has approved the acquisition of Genesee & Wyoming by Brookfield Asset Management and GIC.

The last July had tabled the $8.4 billion acquisition of the operator of short-line railroads. The deal is expected to close late this year or in early 2020.

The agency said he decided that the purchase of G&W is an exemption to its rules for when to review the acquisition of a railroad.

The STB had said in July that it wanted to consider whether it was appropriate to grant the normal exemption for an acquisition that does not involve two railroads, a Class I, or a transaction that links rail lines.

Brookfield had sought to acquire G&W in a transaction that would be exempt from STB review, as typically occurs when a non-railroad company acquires a railroad.

“After considering the comments and other information submitted into the record, the Board will allow the exemption to take effect,” the STB concluded.

“The comments submitted do not undermine the applicability of the . . . class exemption process.”

STB member Martin Oberman raised a question about whether the traditional exemption rule was the right tool for the job given the size, scope, and importance of G&W and its 106 American railroads.

“For these reasons, in my opinion, this proceeding raises significant questions regarding whether transactions of this magnitude were contemplated when the class exemption regulations were adopted, and therefore raises questions as to whether it is appropriate for such major transactions to be eligible under those regulations in the first place,” Oberman wrote.

“While I agree that, under existing regulations, this transaction may proceed as a class exemption, I do think the Board should consider in the future whether the exemption process should be applicable to transactions of such scale.

The STB’s decision requires G&W and Brookfield to keep it informed about the review of the deal by the federal government’s Committee on Foreign Investment in the United States.

Brookfield is based in Toronoto while GIC, an investment firm, is based in Singapore.

The firms plan to make the G&W a privately-held holding company.
G&W owns 120 short lines, most of them located in North America. It also has operations in Australia and Europe.

Tags: Brookfield Asset Management, Brookfield Infrastructure, Brookfield Investment Partners, Genesee & Wyoming, mergers and acquisitions, U.S. Surface Transportation Board