RailAmerica, Another Buffett-Type Buyout Possibility

When Warren Buffett and Berkshire Hathaway Inc. (NYSE: BRK-B)(NYSE: BRK-A) made the acquisition of Burlington Northern Santa Fe, the speculation was that more rail mergers could be expected.  After all, if Warren Buffett likes the sector on a ‘forever’ buy and hold strategy then others would too.  But no other rail mergers have come worth noting.  That may be about to change.

RailAmerica, Inc. (NYSE: RA) recently announced the redemption of $74 million in its remaining 9.25% notes due in 2017.  That is not enough to move the needle on a stock by much that is worth over $1 billion in market value.  What can move a stock this much is takeover chatter.  The Jacksonville Business Journal is quoting Trains Magazine noting that Fortress Investment Group LLC is looking to sell its majority stake in RailAmerica.

Warren Buffett was listed as on potential acquirer and RailAmerica has 45 individual railroad lines with approximately 7,500 miles of track throughout 28 states in America and another three Canadian provinces.

RailAmerica shares are up almost 6% at $22.81 against a 52-week trading range of $11.06 to $23.90.  Its market value is listed as $1.15 billion according to Yahoo! Finance.

Until news gets more concrete, we would only treat reports of this sort as a market rumor.

JON C. OGG