Patriot Rail Acquires Delta Southern Railroad (Updated Jan. 9)

Patriot Rail’s acquisition of Delta Southern Railroad (map above) will support its growth strategy, increasing the company’s short line operations to 32 railroads.

Jacksonville, Fla.-based Patriot Rail Company LLC in September reported that it would expand its small-railroad portfolio with the acquisition of Delta Southern Railroad (DSRR), which operates two line segments in Louisiana. Financial terms were not disclosed. The Surface Transportation Board (STB) in December reported the transaction could be consummated on or after Jan. 6, 2023. It was completed Jan. 9.

The move follows Patriot Rail’s Aug. 8 announcement of its acquisition of Pioneer Lines, a railroad holding company with 15 short lines across 12 states, from BRX Transportation Holdings. That transaction closed Sept. 14.

Patriot Rail on Sept. 26 said the DSRR acquisition will support its growth strategy, increasing the company’s short line operations to 32 railroads. DSRR will be Patriot Rail’s second short line in Louisiana, where it already owns and operates the 68-mile Louisiana and North West Railroad (LNW), which is headquartered in Homer, La., and provides rail service from Gibsland, La., to McNeil, Ark.

DSRR’s two lines, totaling more than 40 miles of track, are located approximately 60 miles apart in Monroe and Tallulah, La., and intersect with Kansas City Southern’s Meridian Speedway and Louisiana Highway 20. The short line serves the Lake Providence and Madison Parish ports on the Mississippi River, and also interchanges with Union Pacific. It transports grain, aggregate materials, agricultural products, cotton, coal, chemicals, fertilizer, forest products, sand clay and soda ash.

“Including Delta Southern in Patriot Rail’s expanding network will enable further competitive options for rail shippers in Louisiana and across the country,” said Patriot Rail CEO John E. Fenton, who noted that the acquisition “exemplifies our growth focus on quality rail franchises to meet customer needs.” In addition to short lines, Patriot also runs a scenic rail excursion train and rail-related services companies with operations in 23 states.

“We are excited to join a highly-respected company like Patriot, which has a strong track record of growth and significant resources to continue building a first-class rail network,” DSRR CEO Jon Ryan said. “I am incredibly proud of the strong foundation that DSRR has built, and as we bring together two best-in-class companies, I am excited to see what we can accomplish together. As DSRR enters its next chapter, I am confident we will continue to drive benefits for our customers and our employees, as well as the local Louisiana communities that we operate in.”

Winston & Strawn LLP and Gentry Locke served as legal counsel to Patriot. Northborne Partners served as financial advisor to DSRR and Reed Smith LLP served as legal counsel.

STB in its Dec. 20 decision (download below) reported that “Patriot Rail Company LLC (Patriot), SteelRiver Transport Ventures LLC; Global Diversified Infrastructure Fund (North America) LP; First State Infrastructure Managers (International) Limited; and Mitsubishi UFJ Financial Group, Inc. (MUFG) (collectively, Patriot Rail), have filed a verified notice of exemption pursuant to 49 CFR 1180.2(d)(2) to acquire control of Delta Southern Railroad, Inc. (DSRR), a Class III rail carrier. Through this transaction, Patriot Rail would acquire from West Branch Intermediate Holdings, LLC (West Branch), a noncarrier, a controlling interest in DSRR. … The transaction may be consummated on or after January 6, 2023, the effective date of the exemption. According to the verified notice, through a Stock Purchase Agreement, Patriot would acquire a controlling interest in DSRR through Patriot’s purchase of all DSRR’s issued and outstanding stock. Patriot states that the proposed transaction involves a stock acquisition and would have no effect on DSRR’s corporate entity status. The verified notice indicates that: (1) none of the Patriot Short Lines connect with DSSR; (2) the transaction is not part of a series of anticipated transactions that would connect any of the Patriot Short Lines or DSRR; and (3) the transaction does not involve a Class I rail carrier. The proposed transaction is therefore exempt from the prior approval requirements of 49 U.S.C. 11323 pursuant to 49 CFR 1180.2(d)(2). … Because this transaction involves Class III rail carriers only, the Board … may not impose labor protective conditions for this transaction.”

Patriot Rail on Dec. 9 reported completing the DSRR acquisition.