Oregon-based Greenbrier, a railcar manufacturer that serves markets in North America, Europe, Saudi Arabia and Brazil, will acquire the assets from ITE Management in a transaction valued at $400 million, the company said on April 18. ITE acquired American Railcar Industries in December 2018.
Greenbrier said the deal will "diversify" its manufacturing presence in North America by enabling the company to provide its North American customers, which include the Class I railroads and shortlines, shippers and railcar lessors, with complementary and supplementary car component offerings. The deal will include the acquisition of two railcar manufacturing facilities in Arkansas and five other operations that supply parts such as hopper car outlets, tank car valves, axles, castings and railcar running boards.
The acquisition, which is subject to regulatory review, is expected to close sometime this year.
Greenbrier's acquisition comes as the company seeks to provide railcars that work well with the precision scheduling railroading (PSR) model that has been adopted by all the Class I railroads except BNSF. PSR is an operating tool in which railroads deploy railcars on a fixed schedule.
"We have a history of introducing new [and] more efficient railcar design, and that is attractive to companies that are implementing PSR," Greenbrier treasurer Justin Roberts said during the company's second quarter earnings call on April 5.
Greenbrier has not been directly affected by the railroads' implementation of PSR, but it is watching how the tool's integration with the wider rail network plays out, according to the company's chief executive officer Bill Furman.
"We're certainly seeing efficiencies arising at Union Pacific (NYSE: UNP) through PSR and other railroads, but it's leading some of the shippers to look at other ways to haul their freight," Furman said. "Some of those other ways can be through creative programs that can benefit leasing companies and car builders as they aggregate demand in the North American network."
Greenbrier also expects to "have very good momentum into 2020" with strong demand for some products, such as gondolas, and favorable conditions for plastics and tank car demand, Furman said.
Image sourced from Pixabay
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