The Greenbrier Companies entered an agreement with ITE Management LP (ITE) to acquire the manufacturing business American Railcar Industries (ARI) in a transaction valued at USD 400 million, and after adjustments for net tax benefits accruing to the Greenbrier, valued at USD 30 million.
The gross purchase price of the manufacturing business totals USD 430 million, which includes USD 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 USD 50 million. The balance of the gross purchase price is cash consideration.
The transaction is subject to customary regulatory reviews and approvals and after receiving the required approvals, Greenbrier expects the deal to close in 2019.
Under the agreement, Greenbrier will acquire two railcar manufacturing facilities in Arkansas and 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.
The acquisition will diversify Greenbrier’s American manufacturing presence, as well as broaden its product offerings with the addition of complementary designs.
“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,” William Furman, the CEO of Greenbrier said.