The Surface Transportation Board lately has been relentless in demanding that applications for mergers and voting trusts, among other transactions, meet its standards for completeness.
The most recent example of this is STB’s decision rejecting as “incomplete” the merger application filed by CSX Transportation, Inc. to acquire control of Pan Am Systems, Inc. and its short line railroad subsidiaries. The Board said it “found that the application did not include all of the information necessary for purposes of a ‘significant’ transaction under the Board’s regulations. The Board’s decision expresses no conclusions about the ultimate merits of the proposed transaction, expressly permits the applicants to file a revised application, and provides guidance on the informational requirements.”
The Board’s decision in CSX Corporation and CSX Transportation, Inc., et al.—Control and Merger—Pan Am Systems, Inc., Pan Am Railways, Inc., Boston and Maine Corporation, Maine Central Railroad Company, Northern Railroad, Pan Am Southern LLC, Portland Terminal Company, Springfield Terminal Railway Company, Stony Brook Railroad Company, and Vermont & Massachusetts Railroad Company, FD 36472 et al. can be downloaded:
Jim Blaze Perspective
Railroad economist and Railway Age Contributing Editor Jim Blaze was involved in every major ICC/STB rail industry merger at a technical, working and analytic level between 1974 and 2020. Some of that work included post-merger results audits and FRA safety oversight monitoring, beginning with the USRA reorganization of the Penn Central and other Northeast bankrupt carriers into Conrail in the mid-1970s. Following are his observations:
“Federal regulators in effect are telling CSX to resubmit necessary documentation supporting the rather-complex proposed Pan Am rail acquisition and multiple-party future plan.
“The essential question seems, upon further review, to be in my opinion: Is there going to be traffic growth, or not? And how might Norfolk Southern as a party to the deal participate in growth if, in fact, NS key trackage rights over parts of the CSX (former Conrail/Boston & Albany tracks between the Albany, N.Y., area and the Worcester, Mass., area) are limited to only a few intermodal trains a day? The outline of this growth issue was somewhat inconsistent as to future growth and NS vs. CSX competition. How long it might take to complete the filing details has not been announced.
“However, based on the history of conducting the necessary data research and creating new pro-forma technical exhibits during past ICC and STB merger procedures, I believe that CSX and its cooperating parties might need as much as two months analytic and writing time. The process might, for instance, require a whole new pre/post-merger traffic diversion study. That could take two to three weeks. Then, the traffic volume shifts have to be converted into train operational and resource-needs calculations.
“There are a few other points that CSX, late on May 26, announced it would comply with on a refined, fuller application:
“CSX originally filed its somewhat detailed merger application back on April 26th. The STB found that the market competition and market pattern shift analysis is lacking sufficient detail, given STB’s reaction that the complex deal structure is a significant change rather than just a minor change.
“The Board said it ‘finds that the Market Analysis and supporting verified statements do not sufficiently describe the impacts of the proposed transaction—both adverse and beneficial—on inter- and intramodal competition, nor do they meet the other specific requirements for a Market Analysis, including the requirement for supporting data. Because the Market Analysis is incomplete, the Application will be rejected at this time.’
“The STB cited the issue of future traffic growth being somewhat unclear in the face of the applicant’s stated improvements in future service. The STB pointed out that ‘one would expect some growth in traffic volume.’
“Neither CSX or NS so far has not made any immediate clarifying remarks about the missing evidence, marketing analytics or train operating pattern projections.”