RailAmerica IPO Set for This Month

The initial public stock offering of short line operator RailAmerica, Inc. this month will include about 21 million shares priced at between $16 and $18.

In a Sept. 29 filing with the government, the company said that its shares will be listed and traded on the New York Stock Exchange under the symbol RA. Half of the shares in the offering will be sold by existing shareholders. After the IPO, private equity funds managed by a unit of Fortress Investment Group LLC  will own 57.7 percent of RailAmerica's stock. Fortress bought RailAmerica in 2007.

RailAmerica estimated net proceeds from the IPO would be about $163 million, which it said it would earmark to pay down debt and fund acquisitions, among other things.

RailAmerica generated total operating revenue last year of $508.5 million and net income of $16.5 million. It had total operating revenue of $206.5 million and net income of $19.2 million for the six months ended June 30, 2009, according to the filing.

RailAmerica operates a portfolio of 40 individual railroads with approximately 7,500 miles of track in 27 U.S. states and three Canadian provinces. Its railroads hauled more than one million carloads of freight for approximately 1,800 customers last year.

It owns about 4,500 track-miles and leases approximately 3,000 track-miles. RailAmerica also owns 240 locomotives and 524 railcars and leases an additional 206 locomotives and 7,195 railcars.

For the year ended Dec. 31, 2008, no single customer accounted for more than 5 percent of its freight revenue and its top 10 customers accounted for approximately 20 percent of the company's freight revenue.

"As one of the largest owners and operators of short line and regional freight railroads in North America, we believe that we are well-positioned to take advantage of the rail industry's favorable dynamics and to continue to grow our business both internally, by growing revenue and earnings from our existing portfolio of railroads, and as an active acquiror in the industry," the company said. "We benefit from significant diversity in our customer base, product base, geographic footprint and our relationships with Class I railroads."

RailAmerica looks to expand the non-freight services it offers. They include managing and positioning railcars within a customer's facility, storing customers' excess or idle railcars on inactive portions of its rail lines, third party railcar repair, and car hire and demurrage. It will also seek to grow its revenue from non-transportation uses of its land holdings such as land leases, crossing or access rights, subsurface rights, signboards and cellular communication towers. The company said it has grown its non-freight revenue from $56.2 million in 2006 to $68.4 million in 2008.

RailAmerica said it would pursue "opportunistic acquisitions" in the rail sector. "We believe that the opportunity to acquire assets at attractive valuations is increasing due to the tighter credit environment combined with lower volumes, which results in more willing sellers of assets and a limited number of buyers that possess both the financial flexibility and the expertise to capitalize on these opportunities," the company said.