The manufacturing side of American Railcar Industries, which has plants in Paragould and Marmaduke, will be sold to publicly traded Greenbrier Cos. Inc. of Lake Oswego, Ore., Greenbrier Cos. said Thursday.
The firm said it will pay hedge-fund ITE Management $430 million in a deal that involves $350 million in cash, $30 million for capital expenditures on rail-car lining facilities and improvements at other facilities, and $50 million in convertible notes.
An ITE Management subsidiary, ITE Rail Fund, bought all of American Railcar in December for $1.34 billion from billionaire investor Carl Ichan, who acquired a majority interest in American Railcar in 2010. ITE Rail Fund will continue to own the maintenance and servicing part of American Railcar, along with more than 14,000 rail cars associated with the leasing business.
Based in St. Charles, Mo., American Railcar began operations in Paragould in 1995 with the opening of a freight-car assembly plant. ARI opened another plant in nearby Marmaduke in 1999 and spent $10.5 million on an expansion in 2015. An ARI subsidiary, Corbitt Manufacturing, opened a plant in Paragould in 2016 with a $3.5 million investment and hired about 60 workers.
ARI has between 1,000 and 1,500 employees at its northeast Arkansas operations, a spokesman for the Arkansas Economic Development Commission said.
ARI has a history of expansions, especially during the oil shale boom to meet an increase in demand for rail cars to transport sand used in the fracking process for natural gas and oil. Even as that boom faded, the need for rail-car loads climbed amid an increase in freight and a shortage of truck drivers.
In a turnabout, in December 2012, it was American Railcar Industries offering to buy Greenbrier Cos. for $542 million.
William A. Furman, chairman and chief executive officer of Greenbrier Cos., specifically noted the Paragould and Marmaduke plants in a conference call Thursday morning, calling their addition to Greenbrier Cos.' operations a "major advantage."
The Arkansas plants build rail cars, hoppers, tank car valves, axles, running boards, and other components and ancillary products. Greenbrier Cos. doesn't make any of those products, Furman said. Furman didn't offer any details on how the Arkansas plants will be affected by the sale.
The northeast Arkansas plants join five other operations, including ARI's engineering facilities in St. Charles, in the sale. The transaction is subject to regulatory approval. Greenbrier officials expect the deal to close by the end of the year.
Furman said Greenbrier Cos. approached ITE not long after the hedge-fund company bought American Railcar in December and expressed an interest in buying the company.
"They decided to work with us to be a potential buyer," Furman said, adding the deal-in-making had a "code name of 'Lazarus' because it's been back from the dead so many times."
He said Greenbrier Cos. and ITE's partnership "isn't meaningfully overlapping." Greenbrier Cos. is typically stronger in its relations with Class 1 railroad buyers and leasing customers, while ITE "hold stronger relationships" with industrial shippers, Furman said.
Greenbrier Cos., an international supplier of equipment and services to global freight transportation markets, designs, builds and markets freight rail cars and marine barges in North America.
"For us, this is a fairly straightforward deal -- purely manufacturing," Furman said. "We expect to have all the manufacturing people [and] the engineering people to be very productive in the space where they are. But we think the efficiencies will come from the integration of their products with our own. The geographic footprint is huge. We're a lot closer to customers potentially in Canada, out of the Midwest, and to the important petrol markets in the South and southeast."
American Railcar reported shipping 1,797 direct-sale rail cars and 601 rail cars built for the company's lease fleet during the first nine months of 2018 compared with 1,698 direct-sale rail cars and 1,485 rail cars built for the lease fleet during the same period in 2017.
Orders for freight cars jumped 35 percent to 23,788 in the second quarter of 2018 from the same period a year earlier, according to the Railway Supply Institute. It was the biggest quarter for rail-car orders since the end of 2014.
Greenbrier Cos. shares rose $1.67, or 1.7 percent, to close Thursday at 35.04.
Business on 04/19/2019