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A railroad IPO? Kind of sounds like we are going back to the 19th century, huh?But it's true. On Maonday, RailAmerica launched its IPO. The company issued 22 million shares at $15 each (the price range was $16 to $18).
RailAmerica is the largest owner of short line and regional freight railroads in North America, with about 7,500 miles of track in 27 US states and three Canadian provinces.
All in all, RailAmerica has a diversified base. There are roughly 1,800 customers and the company distributes a myriad of products, like paper, metals, chemical and coal.
As for the financials, RailAmerica generated $508.5 million in revenues and $16.5 million in net income last year. And, in the first half of this year, revenues came to $206.5 million, with net income of $19.2 million.
A key focus at RailAmerica has been on improving operating efficiencies. The company also has been able to pass along rate increases. In fact, with the comeback in the economy, there is likely to be lots of earnings leverage.
Moreover, RailAmerica is a nice payday for Fortress Investment Group (NYSE: FIG), which took the company private several years ago for $1.1 billion.
However, so far in Tuesday's trading, the shares of RailAmerica are down 3.6% to $14.46.
The underwriters on the IPO included J.P. Morgan (NYSE: JPM), Citi (NYSE: C), Deutsche Bank Securities (NYSE: DB) and Morgan Stanley (NYSE: MS).
Tom Taulli is the author of various books, including The Complete M&A Handbook
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