Genesee & Wyoming Inc. (GWI) announced that it has signed an agreement to acquire nine short line railroads known as the Ohio Central Railroad System (OCR), for $219.0 million in cash. In addition, GWI has agreed to pay contingent consideration of approximately $25 million upon satisfaction of certain conditions. The final purchase price will be adjusted for working capital at the time of closing.

The acquisition is subject to customary closing conditions and is also contingent upon approval from the state of Ohio for the transfer of an operating agreement for one of the railroads. GWI expects to close the acquisition and commence operations in the fourth quarter of 2008.

Founded in 1988 and headquartered in Coshocton, Ohio, OCR operates nine short line railroads located in Southern Ohio, in Youngstown, Ohio, and in Pittsburgh, Pennsylvania.

OCR operates over 445 miles of track and owns 64 locomotives. The railroads handle approximately 140,000 annual carloads, primarily in the coal, steel and solid waste industries.

OCR’s operations in Southern Ohio include the Ohio Central Railroad and the Ohio Southern Railroad, which run a combined 130 miles from South Glouster to Brewster, and the Columbus and Ohio River Railroad, which runs 160 miles from Columbus to Mingo Junction near the Pennsylvania border and 85 miles between Newark and Cambridge. These railroads serve a large coal fired power plant, several coal mines and solid waste landfills, as well as other diversified industries. The railroads interchange with CSX, Norfolk Southern, Wheeling & Lake Erie Railway, RJ Corman Railroad Company and Ohi-Rail.

In and around Youngstown, Ohio, OCR’s operations run over 20 miles and include the Youngstown Belt Railroad, the Youngstown & Austintown Railroad, the Warren & Trumbull Railroad and the Mahoning Valley Railway Company. These railroads primarily serve customers in the steel industry and interchange with CSX and Norfolk Southern.

In Pittsburgh, OCR’s operations run over 50 miles and include the Pittsburgh & Ohio Central Railroad and the Aliquippa & Ohio River Railroad. These railroads primarily serve customers in the cement, chemicals and ethanol industries and interchange with CSX, Norfolk Southern and Wheeling & Lake Erie Railway.

In 2009, GWI expects OCR to generate approximately $70 million of revenues and approximately $20 million of operating income. GWI expects the OCR railroads will have annual capital expenditures of approximately $6 million and annual depreciation and amortization expense of approximately $12 million. These expectations include the ramp-up of certain customer facilities, some of which have recently commenced shipments. GWI expects the acquisition to be immediately accretive to earnings per share and free cash flow.

Comments on the OCR Transaction
“The Ohio Central Railroad System is a valuable regional franchise whose nine railroads serve a diverse customer base in Southern Ohio, Northern Ohio and Western Pennsylvania,” GWI CEO John C. Hellmann said. “Business development on the rail lines has been extraordinarily successful, and we look forward to further increasing shipments and strengthening the local economies. OCR’s safety record is impressive, its employees provide excellent customer service and the physical assets are well maintained. OCR is a welcome addition to the G&W family of railroads.”

GWI owns and operates short line and regional freight railroads in the United States, Canada, Australia and the Netherlands and owns a minority interest in a railroad in Bolivia. Operations currently include 52 railroads organized in nine regions, with more than 6,000 miles of owned and leased track and approximately 3,000 additional miles under track access arrangements. GWI provides rail service at 16 ports in North America and Europe and performs contract coal loading and railcar switching for industrial customers.