Updated with comment from CSX
The Surface Transportation Board (STB) has asked that CSX (NASDAQ: CSX) resubmit its application seeking permission to acquire New England short line Pan Am Railways. Filing the application as a “significant” transaction would enable the board to have more time to mull over the acquisition and determine whether any market competition would be lost.
“Based on the information the board has about the possible competitive impacts today, the board is unable to conclude at this stage that any anticompetitive impacts would clearly be outweighed by the potential contribution to the public interest in meeting significant transportation needs,” STB said in Thursday’s Federal Register.
“However, the classification of this transaction as ‘significant’ should not be read as any indication of how the board might ultimately assess and weigh the benefits and any impacts on competition after development of a more complete record,” STB said.
CSX hopes acquiring Pan Am Railways will strengthen its intermodal presence in the region. The acquisition would include a 50% ownership of Pan Am Southern, which is also partially owned by competitor Norfolk Southern (NYSE: NSC). To resolve NS’ competition concerns, Pan Am Southern would be operated by a Genesee and Wyoming short line.
CSX had filed its request on Feb. 25 to acquire Pan Am Railways as a “minor” transaction since the acquisition would not result in any loss of market competition, according to CSX.
But others, such as short line operator Vermont Rail System, contended that the acquisition would result in a loss of market competition in certain areas. Vermont Rail System sees itself as a competitor to Genesee and Wyoming.
By requiring that CSX file its application for acquisition as a “significant” transaction, CSX will need to resubmit a proposed procedural schedule and pay the fee associated with a “significant” transaction.
“While applicants have taken steps to attempt to address these potential competitive concerns, such as entering into the agreements with [Norfolk Southern] and [Genesee and Wyoming] and making various price, interchange and other commitments … classifying this transaction as ‘significant’ would provide the board with the additional information and time needed to develop a more comprehensive record so that the board may analyze the competitive concerns identified here (and any others not apparent from the notice) and consider whether applicants’ proposed remedies, including the conditions that applicants have requested the board impose, adequately address these concerns,” STB said.
In response to STB’s decision, CSX responded, ““CSX is confident that the proposed acquisition of Pan Am Railways will enhance customer competitiveness and provide benefits to stakeholders in New England and beyond. We look forward to demonstrating this further in our next filing to the STB.”
According to CSX’s February filing, the short lines and assets associated with Pan Am Railways include Pan Am Systems, Pan Am Railways, the Boston and Maine Corp., Maine Central Railroad, Northern Railroad, Portland Terminal, Springfield Terminal Railway, Stony Brook Railroad and Vermont & Massachusetts Railway.