by ccutler
Pan Am realized much of its value when it sold key access routes to terminals to the PAS JV with NS. The merchandise traffic of about 100 loads a day has value too, but you can guesstimate that value as well. Is that $400 per carload? $1000? Let's say it's the latter, for $36.5 million in gross revenue per year, with a 60% operating ratio [which I don't believe to be the case]. Then Pan Am has EBITDA [earnings before interest, taxes, depreciation, and amortization] of $14MM per year. If you love railroads and you'll pay 20 times EBITDA, your purchase price would be $280 million, minus debt outstanding, for the merchandise carload traffic.
You can play with the variables based on your better-informed understanding of their carload traffic, operating profit margins, revenues per carload, and debt load, to determine a value for the carload business.
You should also remember that PanAm also owns 40% of the PAS business. Its not clear what that is worth, but based on NS's original investment, I would guess $100 million to NS, and maybe not much to another suitor. Since NS has traffic rights and benefits from a long haul, the PAS segment is much more valuable to them than it would be to a Pan Am purchaser.
That being said, I would not be surprised to see large infrastructure funds overspend for assets like Pan Am.
You can play with the variables based on your better-informed understanding of their carload traffic, operating profit margins, revenues per carload, and debt load, to determine a value for the carload business.
You should also remember that PanAm also owns 40% of the PAS business. Its not clear what that is worth, but based on NS's original investment, I would guess $100 million to NS, and maybe not much to another suitor. Since NS has traffic rights and benefits from a long haul, the PAS segment is much more valuable to them than it would be to a Pan Am purchaser.
That being said, I would not be surprised to see large infrastructure funds overspend for assets like Pan Am.