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Today, Genesee & Wyoming Inc. (GWI) announced it signed an agreement to acquire the Arizona Eastern Railway Co. (AZER) from Iowa Pacific Holdings L.L.C. for $90.1 million in cash, subject to a final working capital adjustment. The parties expect to close the transaction by the end of the third quarter pending customary closing conditions.

Chartered in 1895, AZER initially operated about 133 miles of track between Bowie and Miami, Ariz. In 2004, Iowa Pacific purchased the short line, and in 2008, purchased an additional line between Clifton, Ariz., and Lordsburg, N.M. Via trackage rights, AZER also connects to the original Bowie line over a 52-mile Union Pacific Railroad line.

The short line primarily serves Freeport-McMoRan’s largest North American copper mine and its North American smelter, hauling copper concentrate, copper anode, copper rod and sulfuric acid. In conjunction with the transaction, AZER and Freeport-McMoRan entered into a long-term agreement through which the short line will provide specific services and complete track upgrades, and the miner will provide certain traffic guarantees.

AZER will be managed as part of GWI’s newly created Mountain West Region, which also includes the Utah Railway and coal loading operations in the Powder River Basin. The region will be led by GWI Senior Vice President Andrew Chunko.
 
“The Arizona Eastern serves world-class copper mining and smelting facilities, and we are pleased to be investing in long term rail infrastructure that will improve rail service and support the expansion of copper production in the region,” said GWI President and Chief Executive Officer Jack Hellmann in a prepared statement, adding that the acquisition further complements other recent investments aimed at serving mining sectors in Canada and Australia.

In addition to the transaction, GWI announced second-quarter financial results. Operating revenue climbed 32.3 percent to a record $209.6 million, same railroad freight revenue rose 11.4 percent to $111.6 million, income from operations jumped 35.1 percent to a record $51.2 million, traffic increased 14.6 percent to 249,508 carloads and the operating ratio dropped 0.5 points to 75.6 compared with second-quarter 2010 figures.

“Our financial performance was well balanced by geography, as our North American and European operations reported an operating ratio of 75.8, and our Australian operations reported an operating ratio of 75.2,” said Hellmann. “Of particular note, our business strengthened over the course of the quarter, thereby supporting our outlook for the second half.”