On May 26, The Surface Transportation Board rejected as “incomplete” the merger application filed by CSX Transportation, Inc. to acquire control of Pan Am Systems, Inc. and its short line railroad subsidiaries. CSX on July 1 submitted an “amended and supplemented application” to the STB, stating that the refreshed application “provides all of the additional details of the proposed transaction requested by the STB.”
Pan Am, headquartered in North Billerica, Mass., owns and operates a nearly 1,200-mile rail network across New England and has a partial interest in the more-than 600-mile Pan Am Southern system, jointly owned with Norfolk Southern. Pan Am’s network reaches multiple ports and large-scale commodity producers. The transaction will expand CSX’s reach in Connecticut, New York and Massachusetts while adding Vermont, New Hampshire and Maine to its existing 23-state network.
“The combination of CSX and Pan Am provides benefits to many stakeholders in New England, as evidenced by the more-than 80 letters of support that shippers, elected officials and business organizations have submitted to the STB,” CSX said. “CSX has also worked to reach agreements with other rail operators and organizations in the region to ensure that the transaction results in enhanced competition and a strengthened rail network in the Northeast.
“The proposed transaction would result in significant investments in the region’s rail infrastructure. Over the next five years, CSX would invest to upgrade and modernize the Pan Am system, which will make the New England rail network more efficient and safer for operations, communities and passenger rail. New England will also benefit from CSX’s track record as leader in environmental performance. CSX will operate Pan Am with a smaller, more reliable and more fuel-efficient [locomotive] fleet, significantly reducing fuel consumption and improving rail’s environmental footprint in the region.
“CSX’s operating model will benefit passenger and commuter carriers in New England as well as shippers as the company commits to maintaining or improving existing passenger service that operates on Pan Am. CSX has a long-standing history of working cooperatively with Amtrak and other passenger rail partners as evidenced by the significant improvement in contractual on-time performance with Amtrak since CSX has implemented its new operating model.”
In a conversation with Railway Age, CSX spokesperson Cindy Schild identified potential areas of traffic growth as forest products, construction materials, paper and intermodal, all of which would benefit from new single-line service. For example, Maine paper manufacturers will have better access to markets outside of New England. CSX’s strategy for New England, she said, is based in large part upon, modal shift—truck-to-rail conversions. While the railroad’s capital investment plan for the Pan Am network is still in its early stages, she said that CSX intends to upgrade existing main line and branch line Class 1 trackage, which is limited to 10 mph, to Class 2 standards, 25 mph. The resulting speed increase will result in measurably safety, efficiency and service.
“CSX is pleased to submit an expanded application for the acquisition of Pan Am Railways, which explains the tremendous benefits of the proposed transaction for stakeholders in New England and beyond,” said President and CEO Jim Foote. “The proposed transaction is an ‘end-to-end’ acquisition that will integrate the New England rail network owned by Pan Am into CSX’s national rail network, creating seamless single-line service. This will provide substantial benefits to shippers with low-cost, environmentally friendly rail service with truck-like reliability. Adding Pan Am to our network will extend the reach of our service to a wider customer base over an expanded territory, creating new efficiencies and market prospects for customers to capitalize on a robust pipeline of growth opportunities to move freight to, from and within New England.”
“Pan Am remains excited about this merger with CSX, a North American leader in rail-based freight transportation,” said Pan Am Railways President David Fink. “We have continued to receive support from our customers about the transaction as they know that CSX’s investment in the region will benefit not only New England shippers but also those who will have new access to their goods and products through the direct connection into CSX’s national rail network.”
Goldman Sachs & Co. LLC is acting as financial advisor and Davis Polk & Wardwell LLP is acting as legal advisor to CSX in connection with the transaction, terms of which have not been disclosed.
Additional information on the transaction can be found at www.nefreightrail.com.