Wells Fargo to sell its railcar business for $4.4 billion

Luke Sharrett/Bloomberg

Wells Fargo has decided to exit its industry-leading position in the rail equipment leasing market, agreeing to sell its portfolio of railcars to a new joint venture for $4.4 billion.

The joint venture between GATX Corp. and Brookfield Infrastructure is financing a portion of the transaction with debt — namely a $3.2 billion term loan and a $250 million revolving credit facility provided by a consortium of lenders, including Wells Fargo Securities.

David Marks, an executive vice president with Wells Fargo Commercial Banking, described the deal in a press release as being "consistent with Wells Fargo's ongoing strategy of simplifying our businesses and focusing on products and services that are core to our clients."

A Wells spokesperson declined to comment further.

The core of Wells' rail equipment leasing assets consists of 105,000 rail cars, which will be managed by Chicago-based GATX, itself a leading rail equipment lessor. Toronto-based Brookfield, one of the world's biggest infrastructure investors, is also acquiring a portfolio of 23,000 rail cars and 440 locomotives from Wells as part of the deal.

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GATX will manage all of the assets included in the deal. The company will start with a 30% ownership stake in the joint venture, but it holds an option to acquire Brookfield's 70% stake over the next 10 years.

"This is a really powerful element of the transaction," GATX President and CEO Robert Lyons said Friday on a conference call with analysts. "It allows us to phase in our investment over time, ensuring we can finance our initial stake and future call options via ordinary cash flows and financing activity."

While Wells has been active in rail equipment leasing for more than three decades, its involvement deepened significantly after 2008. First, it acquired First Union Rail as part of its 2008 merger with Wachovia. It expanded further in 2016 by acquiring GE Railcar Services, and it renamed its business Wells Fargo Rail.

GATX's Lyons described Wells as "a very experienced, sophisticated lessor with a diversified fleet."

The San Francisco-based bank's concentration in freight cars dovetails nicely with GATX's existing emphasis on tanker cars to create a better-balanced combined fleet, Lyons added.

"This [deal] makes GATX the unquestioned leader in this space," Paul Titterton, president of GATX's Rail North America subsidiary, said on the conference call.

The deal with Wells is expected to close in the first quarter of 2026, though GATX is hopeful that it can be completed more quickly. "We're all motivated to make it happen sooner," Lyons said.

For Wells, the sale of its rail equipment assets fits into a larger simplification trend. The $1.9 trillion-asset company has been narrowing its focus to business lines that it believes provide the best pathway to increased growth and profitability.

"I had the opportunity with this management team, when we came to the company, to decide what we think fits and what didn't," Wells CEO Charlie Scharf said Wednesday during a presentation at a conference in New York. "We exited businesses that we thought were low-returning businesses over the cycles. We exited businesses that we didn't think had the right kind of growth rates that didn't make sense for us to invest in."

Wells is the second big bank in the past two years to announce a plan to exit the rail equipment leasing business. PNC Financial Services Group struck a deal to sell its railcar portfolio to Amergin Rail in September 2023.

According to GATX, rail equipment lessors control about 57% of the nearly 1.7 million railcars in North America. Financial institutions have traditionally been active in the business, and a number of them remain so — most prominently First Citizens BancShares, through its CIT Rail subsidiary, and JPMorganChase.