CSX Acquisition of Pan Am Railways

My prediction is that NS will eventually sell part of the old Nickel Plate , Cleveland to Buffalo.

Some observations:

1. Completely agree with others ... CSX is not interested and also unlikely to receive regulatory approval.

2. The consensus view is that NS is also not interested in PAR and perhaps not even their PAS joint venture with Pan Am. I am not really sold on this. I think PAS could be very attractive to NS, perhaps Watco is the partner there.

3. There are a lot of viewpoints that seem to dismiss the value of the route between Portland and Ayer. I think this may be the single most valuable part of the network. Run through rights with minimal fees (if any) are extraordinary, especially inside a major U.S. market area.

4. Class I acquisition of this railroad is extremely complicated. It muddies the water for many of them in ways I'm not sure they would appreciate. Here's a brief run down on those possibilities:

BNSF: Non contiguous to existing territory. Possible run through agreement with NS. Very unlikely.

UP: Non contiguous to existing territory. Possible run through agreement with NS. Very unlikely.

KCS: Non contiguous to existing territory. Possible run through agreement with CSX. Existing joint venture with NS (Meridian Speedway). Most unlikely.

CSX: Regulatory impossibility. Even if only for PAR portion still impossible.

CP: Acquisition into Maine just completed. CP seems like the buyer who would be the most likely to acquire PAR segment of company.

CN: Withdrawal from Maine completed decades ago. Termination of Intermodal service in the last few years to Auburn via SLR. Acquisition greatly complicated by existing route map and short line ownership interests (NECR, G&W (SLR), VRS).

NS: Potential regulatory issues with PAR acquisition. PAS acquisition seems feasible.

-Conclusion: The most obvious scenario for a Class I acquisition would be a split of the railroad at Ayer. PAR to CP and PAS to NS. It is so obvious that it is very easy to overlook. No such thing as "too obvious" with this type of transaction.

The existence of SLR, EMR/NMR likely makes this a reasonable proposition for shippers in Maine.

5. Other operators: G&W appears to be an unlikely buyer due to their ownership of other interests. They may be excluded for regulatory reasons for the same reasons as CSX. They already own too many other lines directly adjacent or connecting to Pan Am.

Watco: Maybe but it seems like a very big bite for them. STB may have concerns about financial capacity.

Fortress Investment Group: Very serious possible buyer. Current stable history as a railroad owner. Strong track record in Florida and Maine. Comfortable with passenger rail considerations. Recent sale of CMQ not only shows a successful record but also disinvests Fortress of interests which might have created regulatory questions. From the point of view of the STB they would be a near perfect fit. They would also maintain the Class I neutrality of the railroad (at least for PAR and maybe for PAS as well).





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Nice analysis. I would love to see Fortress buy the whole system and keep it intact. Seems like it is worth more than the sum of its parts.

Pensyfan19 wrote: ↑Tue Jun 30, 2020 1:43 pm I found an interesting article regarding this matter if anyone is interested.

https://www.railwayage.com/freight/shor ... annel=news

Good commentary but how can an "industry insider" not know that the Conn River is no longer Pan Am's to sell?

An NS/CP split would be interesting. I recall that CP considered buying the MEC in the 60s.

I think Fortress Investment would be the perfect fit in buying Pan Am. Fortress has shown they have the ability to turn around under-maintained, financially troubled railroads. Of course being a hedge fund, they would own the railroad for 8-10 years, before selling the railroad to some other company.

What interest would CP have in PAR? It doesn't seem to make a lot of sense routing wise. A CP acquisition of PAR would also be a huge nail in the coffin for the viability of SLR. I can't imagine G&W would let that happen without a fight.

The MEC as a whole, or the MEC + PAR D2 would make sense under Fortress if NS can keep trackage rights through to Portland. No reason for them to own the line outright if they ever had interest in serving the Portland area.

As far as I can tell all the money for the grant match to improve D1 this year was sunk into tunnel repairs... so not much in way of that work getting done (and here it is almost July none of that quoted work has even begun or materials put out). What a year 2020 has been... STB concerns will surely be there for certain suitors, CP now in Maine erodes the long standing 'Maine is one of a few states without a Class I' precedent that has long been used in favor of some rulings and even grant applications. New England, long revered as the land of shortlines, may get itself a bit smaller in that realm... I'd say for a Class I CN is a good candidate for PAR, they have mentioned publicly several times they are looking for acquisitions this year to boost them into their '3 year profit goal'. They own stand alone operations and the traditional thinking of connecting all of your RR operations into a single network doesn't seem to be within their future thinking (also they are the only Class I who owns two standalone IMCs in Canada, TransX and H&R, who continue to this day to run on CN as well as CP trains). I could easily see CN thinking they could simply 'PSR' the Pan Am property, slash and burn the overhead, dump some money into getting the tracks to high speeds and think they can simply run it as a cash generator. We all know Pan Am has greater potential than what it currently is, so CN makes sense to me. The PAS side will be a bit more complicated with the NS bit, so that is anyone's guess how that goes down.

If not CN, then surely it'll be an investment/shortline group. But hey, as I mentioned before it's 2020... anyone's best guess could be the real result

Agreed that CP coming back into Maine has major long term significance.

What examples are you thinking with regards to CN standalones?

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I would like to point out that anything could happen to Pan Am. I recall when the CMQ was put up for sale, very few thought that CP would buy it. Everyone thought some shortline holding company or even Pan Am themselves would buy it.

Pan Am could be split between NS and a shortline holding company. NS could surprise all of us and buy the entire thing! Pan Am could be sold to a buyer that nobody expects, or maybe it will be split up into a bunch of pieces.

Speculation is great fun, but often times the result that nobody expects is the one that ends up happening.

Just guessing that those who might be dividing the estate's assets however far in the future might have expressed a desire for the railroad-based ones be liquidated in advance. If I -- a non-business major -- can guess it, then so can potential purchasers, not that any potential purchasers would do anything to offset full and fair return to panam.captain.

Is there any source for this claim other than Trains? All the other (non railfan) media I see on the topic just cites Trains, and no other industry or government officials seem to know anything either way. I'm not going to take it too seriously just yet if the only source making the claim is a railfan publication (no disrespect intended), and so far I don't see any media with a more direct source other than citing a secondary source.

Also, "everything is for sale at the right price" even when it's not. So is this a "fire sale, everything MUST go!" or is this just "eh.... meh.... maybe I'll let word slip out that it's for sale and just see if I get any real good offers and then think about whether any of them are too good to refuse.... or not". I'll believe the company is sold when the transaction is complete. A privately held company sale could easily not happen even if the owner showed up with pen in hand if they decide at the last minute not to sign whereas a class I sale is probably happening if a primary source says it is so. Even if "totally true" this could be nothing more than the guy with a Shelby Cobra with 5k miles in the barn that hasn't seen the light of day in 30 years who might sell it if someone showed up willing to pay the right price (all cash, of course). Mellon could still be annoyed over the tunnel issues this month and then have something go his way next month and just say "how silly I was to want to get out... sh*t happens, but I'm over it now".

Shortline614 wrote: ↑Wed Jul 01, 2020 8:36 am I would like to point out that anything could happen to Pan Am. I recall when the CMQ was put up for sale, very few thought that CP would buy it. Everyone thought some shortline holding company or even Pan Am themselves would buy it.

I was just thinking this. At this time last year nobody would have imagined that CP would take interest not only in the Moosehead sub, but also in a branch line leading to a small seaport.
These are weird times, and maybe this time next year we'll all be saying something like "well in hindsight BNSF was of course the obvious choice to operate Ayer-Keag "

i have my money on Iowa pacific.

G&U. Delli Priscoli will turn that baby around!