RailAmerica’s first venture outside North America, the purchase of a line in northern Chile, was announced in February.
The acquisition was the latest in a string of buys for the decade-old company that’s making its mark in short lines–the pieces of business big railroads don’t want or can’t service.
Brothers Gary and John Marino started in 1986 with $150,000 and one line, the Huron & Eastern Railroad in Michigan. The profitable Nasdaq company, which had revenue of $25 million in the first three-quarters of last year, also owns a specialty truckmaker and truck line.
“We are the growth segment of the railroad industry,” said Alice Saylor, vice president and general counsel for The American Short Line Railroad Association. Short lines are “preserving rail service to a lot of communities that 15 years ago would have lost it.”
The number of companies like RailAmerica has more than doubled from fewer than 250 in 1980–when the government deregulated the industry–to more than 500 today.
Truckers are the main short-haul competitors. But, industry analysts say, trucks can’t operate as cheaply as trains for longer hauls and larger commodities. An engineer, conductor and 10 cars are more economical to run than 20 trucks and 20 drivers.
Some short lines have become so successful that their original oers are buying them back, said Tom White, with the Association of American Railroads.
An estimated 30,000 miles of track are for sale in North America. Gary Marino, chairman of RailAmerica, based in Boca Raton, Fla., figures about half is worth having.
RailAmerica recently has been especially aggressive, buying an average of one new line a month. It now has 2,400 miles. Of that, 1,400 are from the Chilean operation.
Aside from Chile, the company has 12 railroads in eight states carrying everything from grain and fertilizer to cotton and scrap metals. Gary Marino’s goal is 4,000 miles by the end of the year.
“It’s a very capital-intensive business,” said Marino, a former banker and venture capitalist.
RailAmerica went public in 1992, raising $3 million. Equity today is $25 million. And, said Marino, the company is considering another offering this year. The acquisitive firm has a $40 million line of credit from banks, which it plans to expand.
“People are seeking us out to put money in the company, which is a far cry from where we were a year ago,” Marino said.
