Icahn to Sell Rail Lessor to Sumitomo in $2.8 Billion Deal

Updated on
  • Cash deal involves 29,000 rail cars with option for 4,800 more
  • Major U.S. railroads have pared spending amid cargo slump

Billionaire activist investor Carl Icahn.

Photographer: Victor J. Blue/Bloomberg

Icahn Enterprises, the investment firm controlled by billionaire Carl Icahn, agreed to sell American Railcar Leasing to Sumitomo Mitsui Banking Corp. in a deal that values the business at $2.78 billion including debt.

The cash transaction involves 29,000 rail cars and is expected to close in the second quarter of 2017, Icahn Enterprises said in a statement Monday. For three years after that, Icahn will have an option to sell Sumitomo another 4,800 rail cars for about $586 million.

A boom of tankcar manufacturing and leasing went bust after oil prices tumbled from more than $100 a barrel in 2014. Major U.S. railroads have cut investment this year as freight carloads for large carriers dropped 5.8 percent this year through the first week of December, led down by a 21 percent drop in coal and a 22 percent plunge in petroleum products. Icahn Enterprises also controls American Railcar Industries Inc., which makes and services railroad cars.

The deal with Sumitomo boosted railcar stocks. FreightCar America Inc. rose 5.3 percent to $15.76 at the close in New York, while Greenbrier Cos. climbed 2.7 percent to $43. American Railcar Industries, which is 61 percent owned by Icahn and separate from the leasing company the billionaire is selling, advanced 4.4 percent to $47.38.

Icahn Enterprises fell 3.3 percent to $59.18. The company is a master-limited partnership that holds stakes in the billionaire activist’s investments in industries including autos, energy, metals, rail cars, casinos, food packaging, real estate and home fashion.

American Railcar Leasing currently manages the fleet of more than 11,000 railroad cars owned by American Railcar Industries. The two companies entered into an agreement that calls for American Railcar Industries to take over the leasing of the cars, according to a filing with the U.S. Securities and Exchange Commission.

The sale of the railcar leasing business is subject to customary closing conditions, Icahn Enterprises said. Deutsche Bank AG served as financial adviser to American Railcar Leasing while Thompson Hine acted as legal counsel.

— With assistance by Beth Jinks

(Updates with transition agreement in the sixth paragraph.)
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