Archives for January 4, 2022

Auxo Investment Partners has acquired Ferrovia Services, a provider of vegetation management services to North American-based railroads. Post-closing, Auxo will combine Ferrovia with Genesis Rail Services, a platform company that it acquired in October 2021.

Genesis Rail provides maintenance of way, construction, and mechanical services to Class I, Class II and industrial railroads across the country including Kansas City Southern, Norfolk Southern, Canadian National, Amtrak, and Florida East Coast Railway.

Railroad classes are defined by revenue size with Class I railroads having annual revenues above $505 million; Class II – typically regional railroads – having revenues from $40 million to $505 million; and Class III – typically short line railroads – having revenues below $40 million. In 1900, there were 132 Class I railroads, but as the result of mergers and bankruptcies, the industry has consolidated and as of August 2021, just 7 Class I railroads remain.

Genesis Rail’s services include track construction and repair; rail tie and plate distribution, installation, and removal; railcar rerailing, maintenance and repair; traction motor and railcar wheel change-outs; and ballast cleaning.

Genesis Rail has facilities in Bluefield, West Virginia (headquarters), and Roanoke, Virginia. The company was founded in 2009 by Jeff Harman and today, in partnership with Auxo, is led by his son Cody Harman.

Auburn, Alabama-based Ferrovia provides vegetation maintenance, inspection, and abatement services to North American-based Class I railroads, as well as a variety of Class II, short line, industrial railroad customers, utilities, and government agencies including state departments of transportation (DoTs).

Ferrovia was founded in 1976 by Jeff Welsh and today is led by CEO Allen Blythe and COO Ryan Cammack. Post-closing, all three executives will maintain an equity ownership in the combined company with Messrs. Blythe and Cammack continuing in their existing roles, and Mr. Welsh remaining in an advisory role.

“Auxo’s deep understanding of the rail industry, customer-first mindset, and philosophy of partnering with founder-led businesses to preserve their autonomy while accelerating next-level growth, really set them apart,” said Mr. Blythe. “Our company has grown significantly for the last five years and working with Auxo and Genesis will position us to move into other services while continuing to service our existing customers, affirming our commitment to innovation, and expanding our vegetation management work to other railroads and DoTs.”

According to Auxo, the railroad industry – driven by the economic recovery, needed restocking conditions, and a tight trucking market – is projected to see significant growth, particularly in the area of intermodal freight, leading to more wear-and-tear and increased demand for rail maintenance. In addition, a heightened focus on more sustainable forms of transportation is expected to drive an increase in rail volumes, and in turn, the need for ongoing maintenance of rail infrastructure. America’s seven Class I railroads together have an estimated repair budget of $7.2 billion, a number that is expected to grow in the coming years.

“As railways continue to outsource mission-critical maintenance services to meet efficiency standards and targeted operating ratios, adding Ferrovia’s best-in-class vegetation management capabilities to Genesis Rail’s existing services creates a unique offering within the railroad industry,” said Jeff Helminski, an Auxo co-founder and managing partner. “With Genesis and Ferrovia integrated into a single platform, their full-service offerings provide our customers with a highly capable, safety-focused and cost-effective track maintenance solution.”

John McPherson, an Auxo’s operating partner and a member of the Genesis Rail board of directors, advised Auxo on the Ferrovia and Genesis acquisitions. “Given its complementary, but not overlapping, service offerings and customer base, Ferrovia will make an excellent fit alongside Genesis,” said Mr. McPherson. “The culture that Allen Blythe has established at Ferrovia is something to be proud of. He knows the industry, how to satisfy the needs of customers, the chemistry between his people, and most importantly, how to run a growing and profitable business.”

In addition to his work with Auxo, Mr. McPherson serves on the board of directors of publicly traded CSX Corporation (NASDAQ: CSX), a Jacksonville-based provider of rail-based freight transportation services with annual revenues of more than $10.5 billion. Mr. McPherson was the president and chief operating officer of Florida East Coast Railway, a subsidiary of Florida East Coast Industries, from 1999 until his retirement in 2007. Earlier, from 1993 to 1999, Mr. McPherson held senior positions, including chief executive officer, at Illinois Central Railroad which was acquired by Canadian National Railway in 1998. Earlier in his career, Mr. McPherson served in various executive capacities at Santa Fe Railroad for more than 25 years.

Auxo invests in North America-based companies that have from $2 million to $20 million of EBITDA. Sectors of interest include manufacturing, industrial, value-added distribution and business services. Typical investments for Auxo occur at corporate transition points, including owner-operators planning retirement, companies exploring family succession, and ownership/management teams seeking growth capital. The firm prefers majority-control investments but will consider select minority opportunities.

Auxo was founded in October 2016 and is led by Mr. Helminski, Jack Kolodny and Fred Tedori. The firm, which is named after the Greek goddess of growth, has offices in Grand Rapids, Michigan, and Los Angeles, California.

© 2022 Private Equity Professional | January 4, 2022