Several infrastructure funds and Canadian pension funds active in infrastructure investments are also evaluating bids for RailAmerica, which has a market value of more than $1.2 billion, the people said.
The Jacksonville, Florida-based company, which is majority owned by Fortress Investment Group, said in May it has hired Deutsche Bank to consider a sale and was in preliminary talks with potential buyers.
The interested parties had submitted initial bids several weeks ago and the sale process is well into the second round, according to the sources, who asked not to be named because details of the process are confidential.
Private equity firms, which typically seek higher returns on investments than infrastructure funds, have shown little interest in a deal, they said.
Greenwich, Conneticut-based Genesee & Wyoming, which has a market value of roughly $3 billion, owns and operates short line and regional freight railroads and provides railcar switching services in the United States, Canada, Australia as well as in some European countries.
Genesee & Wyoming trades at 11 times 12-month forward earnings before interest, tax, depreciation and amortization, while RailAmerica trades at 8.8 times, according to Thomson Reuters Starmine. RailAmerica's shares reached an all-time high on Friday of $24.73.
Pittsburg, Kansas-based Watco, another transportation company interested in buying RailAmerica, operates 27 shortline railroads in the United States and Australia.
RailAmerica and Genesee & Wyoming did not return calls for comment, while Fortress, Watco and Deutsche Bank declined to comment.
The U.S. rail infrastructure sector has not seen major deal activity since Warren Buffett's $26.5 billion acquisition of Burlington Northern Santa Fe Railway in 2010.
RailAmerica is a fraction of that size and operates short line and regional freight railroads. It owns about 45 individual railroads with about 7,500 miles of track in the United States and Canada.
Fortress acquired RailAmerica in 2007 and took it public in 2009. It owns a 60 percent stake in the company. (Reuters)
