Candover, Electra, Lombard wind up 20-year-old investment

UK-listed Candover Investments and Electra Private Equity, and San Francisco-based Lombard Investments have sold their stakes in Dakota, Minnesota & Eastern Railroad Corporation to rival Canadian Pacific after 20 years, although the firms may receive a further return in 18 years time.

UK-listed Candover Investments and Electra Private Equity, as well as San Francisco-based Lombard Investments, have sold their stakes in Dakota, Minnesota & Eastern Railroad Corporation, a US rail company, to rival Canadian Pacific.

Candover will receive £27.4 million ($54 million, €40 million) for its 8 percent stake. Electra did not disclose the size of its stake. Lombard, which led a consortium that acquired the railroad’s initial assets for $34 million in 1986, also did not disclose the size of its majority stake, but said its investment had generated an IRR of approximately 30 percent for its initial investors.

The entire company was sold to Canadian Pacific for $1.48 billion, although the rail company had significant debts.

Dakota, Minnesota & Eastern Railroad Corporation operates 2,500 miles of track in the Midwest. It is attempting to become the third rail carrier in Wyoming’s Powder River Basin.

This may lead to Canadian Pacific paying an extra $1 billion if criteria for the project are met by December 31, 2025. Candover may receive up to $80 million.

Candover’s Nils Stoesser said the buyout firm originally invested in the rail company over 20 years ago, when the buyout firm did not have its current European leveraged buyout focus.

The buyout firms were original equity providers to the business and Candover sold much of its stake in the business in 2002.