Florida East Coast Railway (FEC) Sale

[Jeff Smith]

Sold: Progressive Railroading

No mention of Brightline in the article (discussion on Brightline here: http://railroad.net/forums/viewtopic.php?f=54&t=94565" onclick="window.open(this.href);return false;)

Fair-use:

Grupo Mexico to acquire Florida East Coast Railway Holdings Corp.

GMexico Transportes S.A. de C.V. (GMXT), the transportation business unit of Grupo Mexico, will acquire Florida East Coast Railway Holdings Corp. (FEC) in an all-cash transaction under an agreement announced today.

Subject to closing conditions and government approvals, the FEC acquisition will establish GMXT as an "important railroad owner" in the United States, according to a press release issued by both companies.

GMXT operates more than 6,200 miles of track covering major industrial and commercial zones in Mexico. It connects to international transportation networks through eight seaports and six border crossings, handling more than 1.4 million loads per year.

"The acquisition of FEC is an important strategic addition to our North American transportation service offering," said GMXT President and Chief Executive Officer Alfredo Casar. "Our acquisition of the FEC will significantly enhance the scope, scale and diversification of our service. We are excited to welcome FEC to our transportation team as we work together to provide safe, reliable and efficient rail and trucking services to our customers."
...

[Ridgefielder]

No mention of Brightline in the article (discussion on Brightline here: http://railroad.net/forums/viewtopic.php?f=54&t=94565" onclick="window.open(this.href);return false;)

It's possible it wasn't included in the sale. I have some recollection of Brightline being set up as a separate legal entity connected with the real estate holdings. (Don't have time to wade back through the posts to figure that out right now, though).

[Jeff Smith]

I wasn't sure about that either; whatever the case, they'll be riding on FEC rails, so there's going to be some effect.

Incidentally, and I wasn't sure of this earlier, but I believe we're talking about Ferromex. We'll have to see how the acquisition goes, and it's effect on the US corporate structure.

[Ridgefielder]

I'm looking at the press release right now (sorry, have no way to link to it here.) The acquirer is going to be GMéxico Transportes S.A. de C.V., or GMXT, the wholly-owned transportation subsidiary of Grupo México.

GMXT in turn has three subsidiaries. One is FerroMex-- they own 74% of that, the Union Pacific owns 26%. The other two, which are 100% owned by GMXT, are FerroSur and Imex (an intermodal operation). Here's an illustration of the corporate structure from their website. http://www.gmexico.com/site/en/us/corpo ... cture.html" onclick="window.open(this.href);return false;

Don't know, of course, but I'd assume FEC will be slotted in as a fourth stand-alone GMXT sub.

[MEC407]

Maybe FEC will get a contract to haul border wall materials. #MAGA!

[Gilbert B Norman]

I'm as astounded as anyone who follows industry affairs that such a proposal has been made.

First, considering how demeaning and hostile the incumbent administration has been to Mexico, I have to wonder how forthcoming the regulatory approval noted will be.

Secondly, I must ask what's in it for either party? Obviously there is no physical interchange between the two roads. The manufactured goods Mexico exports to the US originating on Ferromex lines will be interchanged with 26% owner UP through one of the three FCM/UP gateways. Incidentially, the Deepwater port of Lazaro Cardenas, Michuan is served exclusively by KCS-M.

The lucrative Florida real estate holdings are not part of the deal as is, FWIW, All Aboard Florida/Brightline.

So could someone around here enlighten me?

[JayBee]

Well Cemex, the Mexican cement manufacturer has promised to bid on the supply of cement to build the border wall, and they guarantee a competitive price. Cemex is the 2nd largest manufacturer of cement in the world after LaFarge-Holcim.

[rr503]

Point still stands though. Unless Trump sees the lights on climate change and decides to build sea walls instead of border walls, FLORIDA east coast isn't going to help FXE with anything. I am just as mystified as GBN...

[deathtopumpkins]

I'm as astounded as anyone who follows industry affairs that such a proposal has been made.

First, considering how demeaning and hostile the incumbent administration has been to Mexico, I have to wonder how forthcoming the regulatory approval noted will be.

Secondly, I must ask what's in it for either party? Obviously there is no physical interchange between the two roads. The manufactured goods Mexico exports to the US originating on Ferromex lines will be interchanged with 26% owner UP through one of the three FCM/UP gateways. Incidentially, the Deepwater port of Lazaro Cardenas, Michuan is served exclusively by KCS-M.

The lucrative Florida real estate holdings are not part of the deal as is, FWIW, All Aboard Florida/Brightline.

So could someone around here enlighten me?

I think you need to be looking at it from an investment standpoint. It's not the merger of Ferromex and FEC, it's Ferromex's parent company buying FEC. They're not looking for synergies between the two roads, and certainly will not be merging them. Grupo Mexico is just buying FEC as an investment, since it is apparently a handsomely profitable railroad.

I'm very concerned what this will mean for AAF though... I don't think Ferromex is a fan of the idea of reviving passenger trains in Mexico, and I'm inclined to think the same attitude would prevail toward Brightline running on FEC. Plus it complicates the service even further by adding another entity into the mix. Even if the requirement to host Brightline trains is written into the legalese of the sale, who's to say the relationship wouldn't become adversarial in the future?

[Gilbert B Norman]

Mr. Pumpkins, I certainly respect your thoughts that the acquisition does not represent any form of combination between the two transportation companies.

Now in the meantime, I note the dearth of national circulation media coverage regarding this story that I consider earthshaking. This represents the first acquisition by a Mexican company of a US road - and at a time when US-Mexican relations are "not exactly at their Zenith". Nationally circulated, i.e. to reach a "Man from Mars" (intelligent), The Journal has the most coverage:

http://www.wsj.com/articles/grupo-mexic ... 1490719080" onclick="window.open(this.href);return false;

In the print edition, that coverage was reduced to a four inch "roundup" sidebar.

There is of course greater regional coverage such as from AAF's "great buddy", the Gannett Treasure Coast Newspapers:

http://www.tcpalm.com/story/news/local/ ... /99745026/" onclick="window.open(this.href);return false;

Be sure to note the photo leading the article; to me a "read tween the lines" suggests they're saying "hey it's only "twelve a day" now; what will it be like with thirty two more?"

[chrsjrcj]

Be sure to note the photo leading the article; to me a "read tween the lines" suggests they're saying "hey it's only "twelve a day" now; what will it be like with thirty two more?"

The sun will still rise, and people will move on as they did before.

[electricron]

Grupo Mexico is paying $2.1 Billlion to buy FEC railroad, so there's the money Brightline needs to finish construction right there. While they still might want to use government back loans to finance the project, the fact remains they just don't have to have them now because they are awashed in so much newly minted cash.

[ccutler]

They gotta figure out how they can work with FEC for $2.1bn before they try to buy NS

[Gilbert B Norman]

Grupo Mexico is paying $2.1 Billlion to buy FEC railroad, so there's the money Brightline needs to finish construction right there. While they still might want to use government back loans to finance the project, the fact remains they just don't have to have them now because they are awashed in so much newly minted cash.

First, let it be noted a preceeding post has been captioned in its entirety as all of it relates to that which follows.

Ron, let us note that Industries will minus its profitable railroad. The real estate is going to Fortress.

So what hath Industries left? A bundle of wampum ($2B) and a dubious business plan to operate a passenger railroad over someone else's track. On the "other side of the Sheet", there remains the indebtedness incurred to buy the railroad in a leveraged buyout. Although unlikely, the safe approach would be to pay down such indebtedness. Oh but its so much more fun to get high on the Opioids (OPiuM=Other Peoples Money).

If AAF is to move forth, additional financing will have to be found to make improvements to another guy's railroad. Their efforts to make improvements to their own road have, to date, been not exactly successful.

The investment community evidently holds much skepticism over this initiative just as do I.

[Noel Weaver]

It looks like the deal is complete, here is a link.

http://www.railwayage.com/index.php/fre ... ition.html" onclick="window.open(this.href);return false;

I kind of doubt if they will make many if any major changes. I am sure we all wish them all the best.

Noel Weaver