Grupo Mexico to Buy Florida East Coast Railway

By Anthony Harrup 

MEXICO CITY -- Mexican mining and railroad company Grupo Mexico SAB has agreed to buy Florida East Coast Railway Holdings Corp. in a $2.1 billion deal, expanding its transport operations in the U.S. with the acquisition of the 351-mile railway.

Grupo Mexico, which operates Mexico's Ferromex and Ferrosur railways through its transport unit GMXT, said Tuesday that the acquisition will complement its operations in Texas and increase the reach and scale of its North American rail operations.

GMXT will use $350 million in cash and take on $1.75 billion in debt to finance the transaction, which requires government authorizations before closing.

FEC, based in Jacksonville, Fla., is owned by funds managed by affiliates of Fortress Investment Group LLC, operates along the east coast of Florida, serving the ports of Miami, Everglades and Palm Beach and handling some 550,000 railcars a year.

The acquisition will increase earnings before interest, taxes, depreciation and amortization, or Ebitda, at Grupo Mexico's transport division by about 20% to $930 million, based on 2016 earnings, the company said. The division's net debt-to-Ebitda ratio will be about 1.8 times after the financing.

Grupo Mexico is one of the world's biggest copper mining companies, and the leading rail freight operator in Mexico, where it competes with Kansas City Southern de Mexico and other smaller lines.

The acquisition is in addition to GMXT's plan to invest $2 billion over five years.

Grupo Mexico shares were down 1.5% early Tuesday on the Mexican stock exchange.

Although the FEC price looks expensive compared with similar companies, "in the longer term we think this is a positive and strategic operation...that should bring benefits to the company," Grupo Financiero Banorte said in a report.

Write to Anthony Harrup at [e-mail]

(END) Dow Jones Newswires

March 28, 2017 12:53 ET (16:53 GMT)

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