Andersons to Acquire Mile Rail - Analyst Blog

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The Andersons, Inc. ( ANDE ) is acquiring Kansas City, Miss.-based railcar repair and cleaning provider Mile Rail, LLC. The terms were not disclosed and the acquisition is expected to be finalized in the third quarter, pursuant to customary closing conditions.

Operating from its rail headquarters as well as its satellite locations in Nebraska, Kansas and Indiana, Mile Rail repairs and cleans all types of railcars containing a comprehensive range of non-hazardous, hazardous and food grade products and wastes. From its environmental headquarters in Indianapolis, Mile Rail offers industrial maintenance, environmental and waste management services including high pressure water blasting, industrial cleaning, hazardous and non-hazardous waste disposal, product destruction, lab packing, universal waste handling, metal recycling, waste transfer, waste bulking and storage, as well as safety training.

The acquisition is a strategic fit with Andersons' Rail Group. The Rail group includes the leasing, marketing and fleet management of railcars and locomotives, railcar repair and metal fabrication. The Group mainly operates in the used car market by purchasing used cars and repairing and refurbishing them for specific markets and customers. The segment contributed for approximately 3% of the company's sales in 2012 and 4% in the first quarter of 2013.

The acquisition will enhance Andersons' current railcar repair network by expanding its geographical footprint and business mix. The acquisition will enhance Anderson's tank car repair capability and the company can capitalize on the demand for additional capacity in the industry.

The Rail Group delivered significantly higher earnings in 2012, driven by increased financing opportunities, higher average railcar lease rates, larger railcar fleet and expansion in the railcar repair business. Operating income was a record $42.8 million in 2012 compared with $9.8 million in the prior year and it more than doubled from its prior full-year record operating income.

The momentum continued in the first quarter of 2013 with the segment reporting revenues of $46 million, up 28% year over year. Operating income increased nearly two-fold to $14.6 million. The increase was attributable to higher lease rates and increased income from car financings.

The Rail Group is expected to continue to perform well in 2013 as well, based on above-average financing opportunities, strong recovery in lease rates, and expected continued improvement in the repair business. Furthermore, the Mile Rail acquisition is expected to increase Andersons' railcar repair revenues by 25%.

Apart from leasing railcars, Maumee, Ohio-based Andersons is a diversified company operating in five other different business segments ranging from buying, selling and storing grain to running retail stores catering to the latest home hardware needs. It belongs to the agricultural products industry along with Cosan Ltd. ( CZZ ), Archer Daniels Midland Co. ( ADM ) and Bunge Ltd ( BG ). Andersons carries a Zacks Rank #2 (Buy).

ARCHER DANIELS (ADM): Free Stock Analysis Report

ANDERSONS INC (ANDE): Free Stock Analysis Report

BUNGE LTD (BG): Free Stock Analysis Report

COSAN LTD-A (CZZ): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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