In May, GATX Corp. and Brookfield Infrastructure Partners L.P. entered into a definitive agreement to acquire Wells Fargo’s rail operating lease portfolio of approximately 105,000 railcars for $4.4 billion. On Dec. 23, the joint venture partners announced that they have received all required regulatory clearances to complete the transaction, which GATX anticipates will close on or about Jan. 1, 2026.
Initial joint venture equity ownership will be GATX (30%) and Brookfield Infrastructure (70%), with GATX having the option to acquire 100% of the joint venture equity over time. Additionally, Brookfield Infrastructure has entered into an agreement to directly acquire Wells Fargo’s rail finance-lease portfolio, composed of approximately 23,000 railcars and approximately 440 locomotives. GATX will serve as manager of the railcars in the joint venture and of the finance-lease railcars and locomotives directly owned by Brookfield Infrastructure.
Wells Fargo’s 105,000 railcar operating lease portfolio consists primarily of freight cars (95%), spread across a diverse mix of specific car types.Fleet utilization when the deal was announced was approximately 97%.
Joint Venture Structure
Initial equity ownership in the joint venture will be shared between GATX (30%) and Brookfield Infrastructure (70%). GATX will have commercial and operational control of the joint venture assets and will manage all assets on behalf of the partners. “GATX will hold a series of annual call options that, if exercised, will enable GATX to acquire up to 100% of Brookfield Infrastructure’s equity interest over time,” the company said. “If each annual call option is exercised, GATX would acquire Brookfield Infrastructure’s equity interest in 10 years or less. GATX’s initial equity contribution will be approximately $400 million and will be funded through general operating cash flow and financing activity. Future call options, if exercised, also will be funded through general operating cash flow and financing activity and will fit manageably within GATX’s ordinary capital investment plan. It is expected that the joint venture will be a static pool of assets. GATX’s current and future investment and growth initiatives across its businesses are expected to be unaffected by this acquisition.”
Joint Venture Financing
In addition to the partner equity contributions, Wells Fargo Securities, LLC, BofA Securities, MUFG Bank Ltd., and Sumitomo Mitsui Banking Corporation (SMBC) are providing the joint venture with a fully underwritten $3.2 billion, five-year unsecured term loan and a $250 million unsecured revolving credit facility. BofA Securities acted as the sole financial advisor to GATX and Brookfield Infrastructure. Mayer Brown is serving as legal counsel to GATX. Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal counsel to Brookfield Infrastructure.
Financial Statement Impact
“Given GATX’s commercial and operational control of the joint venture assets, it is expected that the joint venture will be consolidated on GATX’s financial statements,” GATX noted. “It is expected that Brookfield Infrastructure’s initial joint venture equity contribution, a Non-Controlling Interest (NCI), will be presented on GATX’s balance sheet as common equity. GATX’s post-acquisition credit and return metrics are expected to be generally in line with current metrics.”
“This is an outstanding opportunity to build on GATX’s leading North American platform,” said Robert C. Lyons, President and CEO of GATX. “Throughout our 125-plus-year history, we have developed unique asset, commercial and operational expertise that positions us to acquire and integrate this fleet. Importantly, by acquiring the assets in this manner, we will maintain the financial flexibility and capacity to continue growing all our businesses while capitalizing on the value creation opportunities inherent in the assets acquired. We will work closely with customers to ensure an efficient transition to GATX’s commercial and operational platform. The acquisition will enhance GATX’s fleet diversification, providing additional opportunities to serve our customers. In the first full year after closing, we expect the impact of the transaction to be modestly accretive to earnings per share, with more material contributions thereafter.”
GATX’s global portfolio of assets includes tank and freight railcars, commercial aircraft spare engines, and tank containers. BIP is the flagship listed infrastructure company of Brookfield Asset Management, a global alternative asset manager, with more than $1 trillion of assets under management.
COMMENTARY
“The acquisition of Wells Fargo Rail by a partnership of GATX with Brookfield Infrastructure represents another private equity reach into operating lessor railcar ownership,” comments Railroad Financial Corp. President and Railway Age Financial Editor David Nahass. “However, in this case, Brookfield has partnered with a knowledgeable and respected partner in GATX, so the deal takes on a different spin. Rumors about a possible sale of Wells Fargo have been circulating for months, but this seemingly negotiated deal demonstrates the benefits of size and of relationships.
“It seems like a savvy win for GATX, which has maintained the option to acquire all of Wells Fargo’s operating fleet without committing 100% of the equity and balance sheet capacity up front. This can cap Brookfield’s upside in the deal but also give it some certainty of return. But acquiring the operating responsibility and oversight for the fleet gives GATX a market position that is almost double its existing fleet size today (~113,000) and gives it a control position over roughly 23% of all operating lessor-owned railcars (~944,000).
“Industry watchers will focus on the very interesting per-car price (without having great detail about the overall age and consistency of the Wells Fargo fleet), which seems to be a very reasonable $42,000 per car.
“After the CPKC merger and even today there are always discussions about “the next merger.” Perhaps the same thought process needs to be applied to railcar operating lessors.”
