RailAmerica Buys Wellsboro & Corning Short Line Railroad
One of the interesting but often-overlooked stories of the rapid growth of Marcellus and Utica Shale drilling is the revival of short line railroads. As drillers enter an area, equipment and materials need to be shipped to that area. Sand, especially, is used in large quantities, and short lines are the most economical way of getting sand to an active drilling area.
One of the short line railroads to came roaring back to life not so long ago is the Wellsboro and Corning Railroad (WCOR), running from Wellsboro in northeastern PA to just across the border connecting to Corning, NY.
MDN reported in March 2010 that in the space of two short years, WCOR’s new owner Tom Myles had seen cargo traffic triple, and he hired 10 new workers in the midst of a deep economic recession, all because of the Marcellus drilling boom (see this MDN story). Mr. Myles has just agreed to sell sell WCOR and a transloading operation he owns, called Industrial Waste Group, to RailAmerica. Mr Myles and other family members part of the current operation will continue in their roles under the new ownership.
From the RailAmerica press release:
RailAmerica today announced that it has signed an agreement to acquire a seventy-percent interest in the Wellsboro and Corning Railroad ("WCOR") and Industrial Waste Group ("IWG") from Myles Group for $18 million. Members of the Myles family will retain the remaining thirty-percent interest in the companies and continue in senior leadership roles. The acquisition is subject to customary closing conditions and is expected to be completed early in the second quarter of 2012.
The WCOR operates 38 miles of track running from Wellsboro, PA to Corning, NY handling a variety of industrial products primarily used in the natural resources industry. RailAmerica anticipates the WCOR to experience rapid traffic growth and expand its freight and non-freight services in support of the development of the Marcellus Shale natural gas industry.
IWG performs transload, storage, and other value-added services for customers in the energy and waste management industries. It operates four transloading facilities located in Wellsboro, PA; Corning, NY; Toledo, OH; and Amelia, VA. RailAmerica expects IWG to continue to grow by developing transload operations in new markets and extending its services throughout RailAmerica’s network.
RailAmerica President and CEO John Giles said, "This is an exciting opportunity for both RailAmerica and Myles Group. The rail and transloading infrastructure at Wellsboro is uniquely located in the heart of the northern Marcellus Shale and represents a key asset in the transportation of both inbound and outbound products for major exploration and production companies. Both WCOR and IWG have established relationships and contracts with leading companies in the energy and related industries. The acquisition allows RailAmerica to gain direct exposure to the enormous potential in the area and also leverage the expertise of Myles Group in opening similar transload facilities throughout the country."
Giles continued, "This transaction, along with our acquisition of the Marquette Railroad also announced today, is the result of our ongoing focus on growth through corporate development and strategic investments. We continue to pursue an active pipeline of opportunities and are optimistic about the outlook for additional accretive investments."
Over the next 12 months of operations, WCOR and IWG combined are expected to generate approximately $17 million in revenue, $3.5 million in operating income (excluding closing costs) and $1.3 million in depreciation and amortization. RailAmerica intends to finance the purchase using cash on hand and its revolving credit facility. The financial results of the WCOR and IWG will be consolidated into RailAmerica’s financials, and RailAmerica’s net income will be reduced by the thirty-percent minority interest.
RailAmerica, Inc. owns and operates short-line and regional freight railroads in North America, operating a portfolio of 43 individual railroads with approximately 7,400 miles of track in 27 U.S. states and three Canadian provinces.