Freight Rail

G&W, Macquarie to buy Glencore Rail

A 51/49 joint venture of Genesee & Wyoming and Macquarie Infrastructure and Real Assets (MIRA) will buy the Hunter rail business of commodities giant Glencore, for $1.14 billion.

The Connecticut-based G&W announced on October 20 it would sell 49% of its Australian business, Genesee & Wyoming Australia, to MIRA, thus creating the GWA partnership, which will then acquire Glencore Rail (GRail).

G&W Australia has until now been the operator of the GRail fleet, but Glencore has been the fleet owner.

The transaction is expected to close on December 1, 2016, subject to approval from the Australian Foreign Investment Review Board.

The news comes a week after the Australian Competition and Consumer Commission aired concerns over separate proposals from major Hunter operators Aurizon and Pacific National to acquire the GRail business.

The GRail sale includes Glencore’s fleet of rollingstock – 30 locomotives and 894 wagons – along with a 20-year, roughly 40 million tonnes per annum haulage contract for coal from Glencore’s mines to the Port of Newcastle.

The ACCC was concerned such an acquisition by PN or Aurizon would essentially create a duopoly in what is already a high-barriers-to-entry market, Hunter coal haulage.

By contrast, this move by G&W gives the US-based operator – which has acted for some time as the third, smaller operator – a larger footprint in the market.

Jack Hellmann, G&W’s president and chief executive officer, said the move would solidify the operator as the most efficient, with the highest service quality, in the Australian rail market.

“Through the acquisition and 49% new equity issued to MIRA, we are effectively doubling the size of GWA and retaining 51% of the business,” he said.

“We are pleased to be enhancing our existing relationship with Glencore through a two-decade rail haulage contract that provides for exclusive rights to rail shipments from some of the premier steam coal mines in the world, serving end users in Japan, South Korea, Taiwan and Southeast Asia.”

Hellman added that G&W’s partnership with MIRA would enable future growth in the Australian market.

MIRA’s Asia Pacific co-head Frank Kwok said the business was pleased to be working with G&W.

“GWA is a strong business that owns and operates essential rail infrastructure supporting industries primarily operating in regional Australia,” Kwok said.

“For MIRA, this agreement expands our infrastructure footprint in Australia and allows us to contribute our international experience investing and managing transport and transport services assets.”