PAS potential acquisition scenarios

"Non-competitive issues" have nothing to do with the PAS venture vs 100% NS purchase in 2009.

Norfolk Southern wished to sustain and grow further their traffic into New England while making the smallest investment possible and also having an out.

If they felt that owning Ayer West would do that that's what they would have done and delt with the STB which ultimately would have ruled favorably.

What's the "out" that NS has or had? Being in a 50/50 partnership is akin to being a little bit pregnant.

Would you rather have spent $50 for half of a business and decide you want out or $100 for all of it and still want out? Either way you still have to find a way to divest, but you're still $50 less in the hole with option A.

PAS is a way for NS to foray into New England without having to go all the way.

General Statement- Service Intentions: 49 C.F.R. § 1150.35(b)(l)
The principal purpose of the transaction subject to this notice of exemption is to
provide more efficient, competitive and reliable rail service to customers by enhancing
the existing rail infrastructure on the lines involved, which will be effected initially by
Norfolk Southern's substantial capital contribution.

CP made an offer... we'll see what happens now.

http://www.bloomberg.com/news/articles/ ... k-southern" onclick="window.open(this.href);return false;

If it gets that far, I look forward to casting my vote for Hunter Harrison to go pound sand.

But it's working for CP their stock is up. No surprise.

newpylong wrote:But it's working for CP their stock is up. No surprise.

So...same time next year with KCS?

All but rejected http://mobile.reuters.com/article/idUSKCN0T62OG20151118" onclick="window.open(this.href);return false;

Was Harrison in charge at CN during the CN-BNSF merger attempt?

He wasn't CEO but COO.

Interesting. So basically he's hell-bent on merging two Class I roads and has been for quite some time...?

F-line to Dudley via Park wrote:So...same time next year with KCS?

That does seem like the logical progression at this point.

MEC407 wrote:Interesting. So basically he's hell-bent on merging two Class I roads and has been for quite some time...?

Potentially; I think the difference here is that Ackman is the driving force here, Ackman also being someone who's on the record of wanting to consolidate the railroad industry (more).

F-line to Dudley via Park wrote:So...same time next year with KCS?

Maybe third time will be the charm there. They'd certainly face the least amount of antitrust scrutiny with that. It'd be a slight to CN, though, as KCS' claim to serving Canada+US+Mexico is through a CN transfer north. While it wouldn't get them the transcon in the direction they want, it'd certainly help them fill the north-south route better than anyone else. But I digress.

I do wonder, though, what ports they particularly want... it isn't really a literal transcontinental railroad they want; they wouldn't have dumped the Canadian Atlantic Railway off to CMQ and Irving in '94 otherwise. They just want access to the more lucrative American ports like their American competitors do. If they wanted to get more east/west miles, the only options would be either PAR, SLQ, or putting back together the Canadian Atlantic Railway.

Now here's a question to throw out there. . .


NS clearly isn't enthused by CP's offer. If CP goes hostile there's probably going to be a fight to poison-pill it. And if that doesn't happen they will in general be wary of CP taking second runs.


Does NS's seeming need to protect itself from unwelcome advances if it bats this one away but needs to circle wagons around the future impact in any way their timetable for taking complete control of PAS? Does it accelerate that likely move from the 5 years-or-less conventional wisdom to something sooner? Or does it distract them to other things.

I have no idea how to even approach that question because so many things feed into it, so what do you guys with more exposure to the industry's business nuts-and-bolts think about reverberations on PAS and relative urgency of NS's future actions re: PAS?

It would seem that NS' best defense against an unwanted CP merger/takeover would be for NS to raise its share price and reduce its OR from 70% closer to 60%, as that is where CP thinks it can make this end to end deal work. WRT raising share price, NS probably needs to cut costs in the coal fields more aggressively by mothballing or selling off under-producing lines. I thinking spending more $ to buy the other 50% of PAS would take a back seat to this assuming such a takeover does little to improve short term share price and operating ratio. The one action NS could exercise with PAS via the formation agreement if it thought it would improve operations to/from Ayer (ie, reduce costs, reduce transit times) is to supply crews for the intermodal and auto trains between Mechanicville and Ayer. To me, it seems there could be an opportunity to reduce crew costs if these trains can reliably operate with single NS crews between Binghamton and E Deerfield yet NS hasn't yet invoked this relatively low cost action. So I wonder if NS is really that interested in owning all of PAS given their other financial challenges.

That would not be low cost because with current track conditions it's not realistic. You could get a train from Bingo to Deerfield in around 11 hours IF there were no stops on any of the 3 railroads, if PAS picked up all the 25 mp west of North Adams back to 40, and CP did not sandbag them crossing over the joint mainline. That's a lot of ifs and would require more cash infusion for track work.

More importantly NS crews are not allowed past Ferry St. The have haulage rights to Ayer not trackage.

newpylong wrote:That would not be low cost because with current track conditions it's not realistic. You could get a train from Bingo to Deerfield in around 11 hours IF there were no stops on any of the 3 railroads, if PAS picked up all the 25 mp west of North Adams back to 40, and CP did not sandbag them crossing over the joint mainline. That's a lot of ifs and would require more cash infusion for track work.

More importantly NS crews are not allowed past Ferry St. The have haulage rights to Ayer not trackage.

Understood. I fully understand that NS currently uses haulage rights over PAS for intermodal and autos. But wrt NS trackage rights over PAS, the STB decision of March 10, 2009 (docket #FD_35147_0) that approved the formation of PAS says the following:

Norfolk Southern must notify the Board 30 days before exercising its trackage rights to haul intermodal and automotive traffic directly over PAS lines in the event of a “Major Service Standard Failure” as defined in the Master Norfolk Southern Joint Use Agreement;

Recall that the Joint Agreement application included this text:

Pursuant to 49 CFR 1180.2(d)(7) and 1180.4(g), Norfolk Southern filed a notice of exemption to permit it to acquire overhead trackage rights over approximately 151.33 miles of track that would be owned or operated by PAS between Mechanicville, NY and Ayer, MA. According to Norfolk Southern, the trackage rights that are the subject of this notice would enable Norfolk Southern to provide direct rail transportation of intermodal traffic to and from the existing intermodal terminal at Ayer, MA, and the new automotive terminal that the Applicants propose to construct at nearby San Vel, MA, in the event that PAS fails to provide haulage services at a service level required under the Transaction Agreement.

My point, perhaps not so compelling, is that, to my knowledge, NS is not sufficiently bothered by PAS current performance with 22K/23K and 28N/287 to have notified the STB that they intend to pick low hanging fruit by providing their own crews to exercise trackage rights. My speculation remains that NS has more urgent financial priorities than taking PAS under its wings if it wants to stave off a CP takeover.