FSI Completes Purchase of Patriot Rail

Global infrastructure investor First State Investments (FSI) has completed its acquisition of Patriot Rail and Ports from SteelRiver Infrastructure Partners, an independent investment manager. Financial terms of the deal—which was for 100% equity—were not disclosed.

Patriot, based in Jacksonville, Fla., operates a portfolio of 12 short line freight railroads with more than 585 track miles across 14 states and a ports business in the Southeastern United States.

The Patriot acquisition “represents the initial unlisted infrastructure investment in the U.S. by First State Investments, which manages more than $US 8 billion of unlisted infrastructure investments across the United Kingdom, continental Europe, Australia, New Zealand and North America, with a focus on mid-market companies in the transportation and utility sectors worldwide. FSI manages more than $US 156 billion worldwide on behalf of institutional and retail investors.”

In addition, FSI has appointed the following as members of the board of directors of Patriot:

• John Fenton, CEO of Patriot since 2012
• Gavin Kerr, director at FSI
• Gilbert Lamphere, chairman of Patriot, chairman of MidRail, former director of CSX and Canadian National, and former chairman of Illinois Central Railway
• Alexander Lynch, former partner of private equity group White Deer Energy, former chairman of North America M&A group at JP Morgan, and former board member of Canadian National and Illinois Central Railway
• John Ma, director at FSI
• Chris McArthur, vice chairman of Patriot and partner at FSI
• Richard Timmons, retired U.S. Army lieutenant general, retired Norfolk Southern Railroad executive, and former president of the American Short Line and Regional Railroad Association

Patriot’s operations include line haul and local rail service in addition to rail-related services such as railcar storage, transloading, railcar cleaning, scrapping, repair and maintenance, and contract switching. The Patriot ports business provides terminal stevedoring, logistics, and warehousing services across nine terminals and two cold storage facilities in the Southeastern United States.

The transaction was financed with a term loan fully underwritten by RBC Capital Markets and Barclays and successfully syndicated before close. FSI was advised by RBC Capital Markets and the law firm of Mayer Brown. SteelRiver was advised by Barclays and the law firm of Winston & Strawn.

“Patriot, with its strong operating business and management team led by CEO John Fenton, is now a core asset in our global infrastructure investment portfolio,” said John Ma, director of the New York-based unlisted infrastructure team for First State. “Railroads are long life assets that provide essential transportation services to a diverse customer base. We are excited to support the Patriot team and see many opportunities to continue to expand the business in North America.”