The Greenbrier Companies, Inc. announced that it has entered into an agreement to acquire the manufacturing business of American Railcar Industries (ARI) from ITE Management LP (ITE) in a transaction valued at $400 million, after adjustments for net tax benefits accruing to the Company, valued at $30 million. The gross purchase price of the manufacturing business totals $430 million. Included in the gross purchase price is $30 million for capital expenditures on railcar lining operations and other facility improvements at ARI. Also included in gross purchase price are convertible notes issued by Greenbrier to ARI in the principal amount of $50 million. The balance of the gross purchase price is cash consideration. Headquartered in St. Charles, Missouri, ARI was acquired by ITE in December 2018.
The acquisition will diversify Greenbrier’s American manufacturing presence, as well as broaden its product offerings with the addition of complementary designs. Greenbrier will acquire two railcar manufacturing facilities in Arkansasand five other operations that provide a range of railcar component and parts supply. These operations build hopper car outlets, tank car valves, axles, castings and railcar running boards, among other ancillary railcar products. Significant manufacturing efficiencies and cost savings are expected from the acquisition, along with a skilled workforce and geographic advantages throughout North America.
“We expect the acquisition to be meaningfully accretive and position Greenbrier for growth in our core manufacturing and engineering business in North America. Cost synergies and economies of scale are expected to benefit our customers, including shippers, leasing companies and North American railroads,” said William A. Furman, Chairman and CEO. “With a broader product portfolio and efficiencies extending from a larger operations base in America, we see this acquisition as a unique opportunity for Greenbrier to extend its position as a global leader in railcar manufacturing, with an increase in our total U.S.-based production and an expansion of our American-based workforce. We are especially pleased to work with ITE on this acquisition, since we already enjoy a strong relationship with them as a valued syndication customer.”
KEY STRATEGIC BENEFITS
The acquisition is expected to:
- Strengthen core North American product base through complementary and supplementary railcar and component offerings, including vertical supply chain benefits.
- Enhance production footprint to better serve a geographically diverse customer base.
- Provide new cost-saving opportunities through use of best practices, increased vertical integration, maximized production runs, improved supply chain efficiencies and lower transportation costs to key markets.
- Increase railcar offerings with access to vertically integrated parts and components.
- Broaden the customer base capitalizing on non-overlapping relationships with strategic operating lessors, Class I and short line railroads and shippers.
The transaction is subject to customary regulatory reviews and approvals. After receiving the required approvals, Greenbrier expects the deal to close in calendar 2019.