RailAmerica Inc, which owns and operates short-line and regional freight railroads in North America, has set the terms for its planned initial public offering, which is scheduled for October.

RailAmerica said in an updated prospectus filed with U.S. regulators it expects to sell 21 million shares for between $16 and $18 apiece and list them under the symbol RA. Half of the shares in the offering will be sold by existing shareholders.

The IPO is scheduled to price on Oct. 12 and begin trading the next day on the New York Stock Exchange.

After the IPO, private equity funds managed by a unit of Fortress Investment Group LLC will own 57.7 percent of RailAmerica's stock.

RailAmerica estimated net proceeds from the IPO be about $163 million, which it said it would use in part to pay down debt.

In the first half of 2009, RailAmerica had sales of $206.4 million, down 19 percent from the year-earlier period, while profits rose fourfold to $19.2 million over the same period.

The IPO will be managed by JP Morgan, Citi, Deutsche Bank Securities and Morgan Stanley.

(Reporting by Phil Wahba; editing by Andre Grenon)

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