GWR Surges Higher Following Brookfield Acquisition

Genesee and Wyoming

A new acquisition of an American railroad holder is a good example of the way things go in today’s global economy.

MarketWatch reports the value of Genesee and Wyoming is up 9% in pre-market trading this morning on the news that the company, which is based on an 1800’s regional American railroad outfit of the same name, is being bought by Brookfield Infrastructure Partners, L.P., which is described this way on its Wikipedia page:

 “Brookfield Infrastructure Partners owns and operates a global network of infrastructure companies in utilities, transportation, energy and communications infrastructure. It invests in transmission and telecommunication lines, toll roads, ports and pipelines.”

Apparently, the purchase price indicates shareholders will get a $12 boost per share on acquisition and the GWR ticker will be seen no more.

It’s worth noting that Genesee and Wyoming itself had grown to hold railroad assets in over half a dozen countries around the world.

But it could be argued that Brookfield Infrastructure Partners is a different kind of global band Genesee and Wyoming, not just in name, but in nature.

All over the American landscape, we see foreign or multinational companies buying out toll roads, bridges, urban parking systems and other kinds of infrastructure. This comes amid worries that the United States municipalities and states in which these systems live can’t afford to fund this infrastructure themselves through tax dollars – so in some cases, they farm these procedures out to foreign investors.

This may not be a sustainable way to manage the country’s infrastructure, but in this particular case, it’s going to be good for GWR shareholders.

Those due to gain from the acquisition, assumedly including former employees and their descendants, haven’t seen $100 prices since 2015, and $112 represents all-time high value for this equity, which is, in a way, a key piece of our national history. Railroad consolidation is worth following as a marker of economic activity in the twenty-first century, and as Tomi Kilgore points out, the Dow Transportation index factors in, too.

“(GWR) has rallied 35% year to date through Friday, while the Dow Jones Transportation Average DJT, +0.64% has gained 14% and the Dow Jones Industrial Average DJIA, +0.65% has advanced 14%,” Kilgore writes.