Carl Icahn's Christmas gift to me

Carl Icahn selling St. Charles railcar leasing firm for up to $3.4 billion

Excerpt:

Billionaire investor Carl Icahn is selling St. Charles-based American Railcar Leasing LLC, or ARL, to another railroad car management company owned by a Japanese bank.

Icahn Enterprises L.P. announced the agreement to sell ARL to SMBC Rail Services LLC, owned by the Sumitomo Mitsui Banking Corporation. The cash sale price, subject to adjustments, is based on an ARL enterprise value of $2.78 billion and a fleet of 29,000 rail cars.

SMBC will have a three-year option to purchase an additional 4,800 rail cars for $586 million, boosting the total price to $3.36 billion. The deal is expected to close in the second quarter of 2017.

"I have been in the railcar business for over 30 years," Icahn said in a statement. "During that time we have built one of the leading railcar fleets in the world... I am very proud of the business we have built at ARL and am pleased that SMBC Rail Services also sees the tremendous value in this business."

Comment: Note the jump in the price mid-day! I began investing in ARII several years ago. For all ARII posts on CFG click here. Icahn owns 61% of ARII so it's a done deal! SMBC Rail Services is private so this will be a cash deal. The expected close is in the first half of calendar year 2017.

Updated: WSJ article

Why I like American Railcar Industries (ARII)

1. Because of the Bakken Oil Boom
2. Because of the volatility of that oil
3. Because of safety concerns transporting that oil
4. Because of aging tanker cars in the system
5. Because railroad companies are concerned about the same
6. Because of the hold up of the Keystone pipeline
7. Because ARII makes newer, safer tanker cars
8. Because of ARII financials including, PE, dividend yield, payout ratio, and enterprise multiple

Railcar Manufacturing: ARII or TRN?

Sometimes investing is like being in the Opthamologist exam ... when the Doctor asks .. which is more in focus A or B. So the question might be JPM or WFC; XOM or COP, DELL or HPQ, HD or LOW, WAG or CVS.

Today's stock comparison is Railcar Manufacturing: ARII or TRN?. I'm not an investor in either yet. Trinity Homepage | American Railcar homepage

My own conclusion is that they are both worthwhile considerations for dividend investing. Seeking Apha has a brief article on American Railcar. Conclusion:

ARII trades at a 25 percent discount from its 52-week high. Crude-by-rail traffic is expected to increase by 300,000 units in 2013, nearly offsetting a drop in coal traffic in 2012. On top of that, coal is moved along a rail network that has been established for decades, while crude oil traffic is along a network that is still in development. Carl Icahn holds 55 percent of the outstanding shares of the ARII. The dividend yield is very generous at 2.9 percent on a very safe 31 percent payout ratio. The Graham fair value is $36.22, forward P/E is 8.54 and analysts expect annual EPS growth of 15 percent over the next five years. ARII appears to be undervalued at this level.