The European Commission (EC) cleared the acquisition of Wells Fargo’s rail assets by GATX and Brookfield Corporation. The portfolio includes around 128,000 wagons and 440 locomotives to lease, with the transaction expected to be somewhere around 4 billion euros (4,4 billion USD).
Wells Fargo’s assets are divided into an operating leasing portfolio (short-term lease) and a finance leasing portfolio (long-term lease). The former is made up of around 105,000 wagons, while the latter includes approximately 23,000 wagons and 440 locomotives. Most of the rolling stock is deployed in the United States, but the EC needed to clear it because both buyers are present in the European market.
GATX leases around 30,000 wagons in the Old Continent, making it one of the largest players in the market. Brookfield, on the other hand, owns key rail freight players such as Freightliner and Rotterdam Rail Feeding. In other words, the Commission had to make sure that the deal would not give unfair advantages to GATX or Brookfield and harm competition. “The Commission concluded that the notified transaction would not raise competition concerns, given the limited impact on the European Economic Area”, the EC said.
Details of the deal
Under the new deal, a joint venture between the two buyers, called GABX, will acquire the operating lease portfolio. For the finance leasing portfolio, Brookfield will be the direct acquirer while GATX will be managing the fleet. The clearance from the EC was one of the last steps needed before officially closing the deal, which should happen in the first quarter of next year at the latest.
Most of the money for the transaction will come from the JV’s committed debt financing, while the remaining 30% is to be funded via equity contributions from both GATX and Brookfield. Wells Fargo’s decision to sell aims at simplifying its business model by concentrating on more profitable and less capital intensive operations such as lending and deposits.