CSX Acquisition of Pan Am Railways

I wonder if the whole thing is off.

Wouldn't THAT be something.

Still the second biggest story on their website after being pushed aside by the financial report. Otherwise "CSX reaches agreement to acquire Pan Am Railways" would still be the top story.

J.D. Lang wrote: ↑Fri Jan 22, 2021 12:26 pm I wonder if the whole thing is off.

No.

Just because it wasn't brought up during the call, doesn't mean its off. It's still on the CSX website as BostonTrainGuy pointed out.

I've been wondering how the various shortlines in the region will react to this. G&W and VRS especially. Considering that PAS is most likely going to become a joint CSX-NS asset, and the Hoosac Tunnel isn't exactly the most well maintained piece of infrastructure. I could see detours over VRS or the B&A becoming permeant. I also think that VRS would like a direct connection with NS.

Where are you folks coming up with this stuff?

When do the terms for Surf Board members expire?

Any anytime soon?

Maybe some party in interest wants to "lobby" Pete, if confirmed (likely), or even Joe, to have an appointment made so the transaction will be completed with favorable terms.

I doubt if any transaction, rail or otherwise, requiring regulatory approval will be presented to its oversight agency "until the dust settles".

Remembering that it took the better part of a decade to fully understand Messrs. Mellon and Fink's strategy in purchasing and how that played out with ownership of the MEC, B&M and D&H, it will be interesting to watch CSX's strategy and behavior unfold. It's too early to know whether this move by CSX is ultimately for the whole PAR system or south of Portland or Waterville, or, how much is defense vs. offense, traffic retention vs. growth, involves an infrastructure or brokered Class 1 deal, or, what markets are targeted.

Some food for thought to munch on during the wait:

-CSX would have to ~double PAR's revenue to match the route mile revenue productivity of their existing system.
-CSX's valuable New England franchise is largely generated from high population density and market share. CN has publicly stated their strategic need to boost traffic on the eastern side of their network and CP has as well and taken a step closer with the purchase of the CM&Q. Important segments of CSX's New England franchise are undergoing evolutionary change with the prospect of growth and new requirements.
-The MA East-West Passenger Rail Study Final Report section 6. "Next Steps and Requirements" finds "the estimated additional capital cost for complying with CSX's design criteria is approximately $1.5 billion". The politics of expanded commuter rail is in transit-oriented development which, In turn, long run pushes freight distribution activity to areas with cheaper land values. Long-term planning estimates show the biggest New England population growth occurring in the area roughly defined by the MA Pike, I-95 and I-91.
-Post-PSR behavior of purchases at CN and CP had at their core big strategic network implications tying into the greater North American rail network and markets. After a period of time there's been some rationalization of the CN and CP purchases matched to their core strategy. Equating this move to extend CSX's network into northern Maine and toward the Maritimes with, say, the strategic impact of CN's purchase of WC seems a bit murky at this point.
-And, perhaps on an inconsequential note though interesting nonetheless, CSX CEO Foote's initial statement about purchasing PAR talks of new efficiencies and market opportunities in one of the most densely populated markets in the US and CSX made an unsolicited end-of-2020 $10,000 donation to the Berkshire Scenic.

Several thoughts have come to mind after reviewing Mr. QB's excellent analysis of the acquisition (subject to regulatory approval).

Regarding the point that revenues from the entire Pan Am system would need to double to be equal with that of Chessie's existing system. The further East she goes, the harder that revenue per route mile will be able to attain. So what does Chessie know (cats are noted for their intelligence compared with dogs)? Does she foresee that the Ports of Saint John and Portland (ignoring Searsport as, save a Shipper's Routing, that belongs to the SOO Line, or CP in the USA) can give her sufficient high value - containers and autos as well as "reasonably high value" forest products (paper and dressed lumber) - traffic to attain that maxim?

Does Chessie foresee that the "Commonwealth of Taxachusetts" will back away from "seizing" the B&A from Springfield Eastward for their passenger train "visions"? For if they move forth, I hate to think of the Fancy Feast she will have to do without to rebuild from the ground up (and the ground down considering Hoosac) to get the rinky dink FRA Class 2 PAS up to 3 or maybe even 4 to be the sole East-West road into New England - and all this traffic she envisions moving over the Maine Central (maybe she only needs 3 up there and still be in the market - considering those "excellent" Maine highways).

Now regarding Mr. QB's point "in my backyard"; the "original SOO" once noted; "We have a longer route (compared with the MILW, Q, and CNW) so we have to just run faster". Sixty years after that statement was made (to DPM or Wally Abbey; can't recall), CN accepts it as true. Acquiring "the J" - never a rinky dink - gives the CN a competitive advantage handling traffic through Chicago that not even CP and CSX have, with their jointly owned IHB, and can match.

I thought we "put to bed" the B&A being removed from the equation? If not, PAS will not become the CSX route into New England. End of story.

Although it's tempting to read something into the delay in the NS filing I have seen too many things slowed down by COVID to be willing to read into the situation any further.

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Figure on a split sale,with PAS going to NS,that should make the STB happy as there will be competing lines offering service into the far northeastern US region.
The only downside is the amount of ROW upgrades need to get rid of years of very little maintenance and proper Domestic Doublestack clearance thru the tunnel.

Donation to CSRR is interesting. Perhaps in the future they will donate the PAR business train set or some locomotives for parts. But CSRR is a for-profit? Can they take donations?

If it is going to be a drag on the P&L they can play accounting games to keep it unconsolidated.

I assume CSX will agree to lease / sell / agree to passenger rights for Springfield-Worcester to MassDOT based on government upgrades.

With Worcester yard at or beyond capacity and Beacon Park closed, how much business has CSX lost to PAR/PAS?

Backshophoss wrote: ↑Sun Jan 24, 2021 12:58 am Figure on a split sale,with PAS going to NS,that should make the STB happy as there will be competing lines offering service into the far northeastern US region.
The only downside is the amount of ROW upgrades need to get rid of years of very little maintenance and proper Domestic Doublestack clearance thru the tunnel.

NS has been fine with PAS plodding along moving their cars at 25 I'm sure they would also be fine with it in the interim until they can bump it (back) up to Class 3. There is a lot of new rail on the line the work required to move up a class is not as much as folks think.

They've also been running singles through the tunnel for years but have the capacity to fillet and toupe until it can be expanded.

Morale of the story is the railroad as-is is serviceable if they get the whole thing. It's logical but still a stretch IMHO.

There is a strong rumor going around about the NYSW operating PAS.

I don’t see where the East-West passenger service necessarily means a total seizure requiring CSX to use PAS as its sole route as some have suggested. Having paid attention to the passenger study all of of the alternatives want to build the system in a way that minimizes impacts to freight - the study has never mentioned even once making this a passenger only corridor and two of the alternatives involve building a separate passenger only track next to CSX’s track on the Springfield to Worcester portion to allow for greater speeds than co-mingling with CSX (all options involve shared infrastructure out to Pittsfield but fully double tracked). We aren’t talking NEC levels of service and certainly not commuter rail - think a service around the size of the Downeaster with four or five round trips joining the existing daily Lake Shore making a total of five or six round trips. And if the service doesn’t ultimatelyextend beyond Springfield it’s even less of an impact given that freight traffic east of West Springfield is less than traffic to the west.

Even if the state buys it they are likely going to retain exclusive freight rights over their customers and trackage rights to run their trains probably in the form of a sellable/transferable easement like when MassDOT bought the CT River line from PAS - I don’t see MassDOT wanting to boot them out. And they might even ask CSX to still dispatch and maintain tracks and signals as PAS thru ST still does on the CT river.