Brookfield selling G&W’s Australian business to Macquarie

02 August 2019 - 12:00 am UTC

Brookfield Infrastructure Partners (BIP) will sell its stake in the Australian arm of Genesee & Wyoming (G&W) to a consortium led by Macquarie Infrastructure and Real Assets (MIRA), Brookfield announced on its 2Q19 earnings call.

 

Brookfield, which reached a USD 8.4bn take-private for G&W last month, expects the sale of its 51% interest in the Australian business to close concurrently with its purchase of G&W in 4Q19, BIP CEO Sam Pollock said on the 2 August call. MIRA already owns a 49% stake in the Australian business of Connecticut-based G&W, which is primarily active in the US but also owns railroads in Canada, Australia and Europe.

 

Brookfield’s equity stake in G&W is roughly USD 500m, with GIC and Brookfield’s institutional partners collectively providing the bulk of the equity. Pollock called the deal a “rare opportunity to acquire a rail infrastructure network of scale, particularly in North America, for good risk-adjusted returns.”

 

“We feel we are well-positioned to drive value through our operational approach,” Pollack said. “Our areas of focus will be to maximize commercial opportunities, expand through strategic tuck-ins, and also improve margins over time.”

 

BIP reported USD 98m in net income (USD .12 per share) in the second quarter and USD 128m (USD .07 per share) in the first half. This is down from USD 125m in 2Q18 and USD 334m in 1H18 – Brookfield warns against year-on-year comparisons, since 2018 numbers included higher mark-to-market gains on its corporate hedging program.

 

Funds from operation for the firm totaled USD 337m for the quarter and USD 688m during the first half, up from USD 294m and USD 627m respectively last year.

 

“The meaningful increase in our results reflects the impact of the most recent phase of our asset rotation strategy,” Pollock said in a press release. “We have invested or committed to invest a further USD 1.3bn into four high-quality businesses predominantly in North America and India. These businesses have strong going-in cash-on-cash yields that should set the stage for further growth in our results heading into 2020.”

 

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