News & Reviews News Wire Regulators approve CSX Transportation’s acquisition of Pan Am Railways (updated)

Regulators approve CSX Transportation’s acquisition of Pan Am Railways (updated)

By Bill Stephens | April 14, 2022

Surface Transportation Board agrees that deal will improve rail service in New England

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Front of a train
A former CSX B40-8 leads a Pan Am Railways train at Plainville, Conn., on Feb. 6, 2021. The Surface Transportation Board has approved CSX’s acquisition of the New England regional. (Scott A. Hartley)

WASHINGTON – Federal regulators on Thursday gave the green light to CSX Transportation’s acquisition of New England regional Pan Am Railways.

The Surface Transportation Board’s unanimous, 75-page decision approving the merger becomes effective on May 14. But CSX said it planned to close on the transaction on June 1.

Regulators largely agreed with CSX’s arguments that the merger will result in much-needed capital improvements to the worn out Pan Am system while improving service and safety. CSX has pledged to spend more than $100 million to improve Pan Am’s track, bridges, and yards as well as its aging and failure-prone locomotive fleet, over the next three years.

“After a searching review of the well-developed record in this proceeding, which included a two-day public hearing before the full Board, the Board concluded that this transaction satisfies the statutory criteria based on CSX’s representations to the Board. I look forward to improvements in the rail network with respect to reliable service and competitive transportation options in New England and beyond,” STB Chairman Martin J. Oberman said.

CSX, already the dominant freight railroad in the region, will extend its reach into Vermont, New Hampshire, and Maine, as well as to Saint John, New Brunswick, via Pan Am’s haulage rights agreement with Irving-owned short lines.

“CSX is pleased that the STB approved the proposed acquisition of Pan Am and has recognized the significant benefits this transaction will bring to shippers and other New England stakeholders,” CEO Jim Foote said in a statement. “We look forward to integrating Pan Am, their employees and the rail-served industries of the Northeast into CSX and to working in partnership with connecting railroads to provide exceptional supply chain solutions to New England and beyond.”

The board also approved several transactions related to the Pan Am Southern, the joint venture between Pan Am Railways and Norfolk Southern. CSX will step into Pan Am Railways’ shoes in the joint venture, which gives NS access to New England via the former Boston & Maine line from Mechanicville, N.Y., to Ayer, Mass., via Hoosac Tunnel.

The board approved Norfolk Southern’s new trackage rights over CSX from the Albany, N.Y., area to Worcester and Ayer, Mass., as a faster and fully cleared route for intermodal and automotive traffic. The daily intermodal and automotive train NS operates over Pan Am Southern will shift to the CSX routing once a new connection is built at Voorheesville, N.Y.

The other big PAS-related transaction – the designation of Genesee & Wyoming subsidiary Berkshire & Eastern as neutral operator of the Pan Am Southern – also was approved. The board’s five-year oversight of the merger will include a requirement that CSX provide reports on Pan Am Southern traffic levels west of Ayer, Mass., for at least two years.

All agreements that CSX reached with various parties – including Amtrak, Vermont Rail System, and the Northern New England Passenger Rail Authority that sponsors the Downeaster service linking Portland, Maine, with Boston – were imposed as conditions on the merger.

But the STB declined to impose additional conditions that Amtrak and the Massachusetts Bay Transportation Authority had sought to protect passenger and commuter service, noting they are already covered under existing contracts or regulations.

“Whether the Board has authority to impose conditions relating to passenger and commuter rail has been the subject of debate throughout this proceeding. Without deciding whether the Board has such authority, the Board — even if it has such authority — would not exercise its discretion to use it here,” the decision reads.

The decision orders CSX to uphold its commitments to keeping interchanges open on commercially reasonable terms, an issue that was important to Canadian Pacific and short line Vermont Rail System.

VRS was granted overhead trackage rights over Pan Am Southern between White River Junction, Vt., and Bellows Falls, Vt., as well as limited trackage rights from Bellows Falls to East Deerfield, Mass. CSX will have haulage rights over Pan Am Southern between Rotterdam Junction, N.Y., and Hoosick Junction, N.Y., the interchange with VRS.

Pan Am, a privately held company owned by Tim Mellon and other investors, went on the market in 2020. CSX’s bid beat two other suitors who were interested in acquiring the largest regional railroad in North America.

Including haulage rights, Pan Am stretches 1,700 miles from the Albany, N.Y., area to Maine. It includes trackage of the former Maine Central, Boston & Maine, Portland Terminal, and Springfield Terminal railroads. Pan Am connects with four Class I railroads — CSX, Norfolk Southern, Canadian National, and Canadian Pacific — and 14 short lines.

CSX connects with Pan Am at Rotterdam Junction, N.Y., on its former New York Central Water Level Route, and outside of Worcester, Mass., via its former Boston & Albany main line, which is far and away the busiest freight route in New England.

Pan Am entered the rail business in 1981 when the company, then known as Guilford Transportation Industries, purchased the Maine Central for $15 million. Two years later, Guilford purchased the bankrupt Boston & Maine for $24.5 million. Guilford acquired the Delaware & Hudson from Norfolk & Western for $500,000 in 1984, but cast it off into bankruptcy in 1988.

Guilford Rail System was rebranded as Pan Am in 2006. Despite the long-term decline of Maine’s paper and forest product industries, as well as manufacturing across New England, Pan Am and Guilford have managed to turn a profit every year.

Terms of the deal were not disclosed, although people familiar with the matter said the purchase price was approximately $700 million.

Map showing Pan Am Railways, Pan Am Southern, and northernmost portion of CSX Transportation
A detail from a map filed with the Surface Transportation Board shows how Pan Am Railways (in red) and Pan Am Southern (in green) connects with the easternmost portion of CSX Transportation. (CSX)

Updated at 6:20 p.m. Central Time with comment from CSX, including anticipated closing date of transaction.

22 thoughts on “Regulators approve CSX Transportation’s acquisition of Pan Am Railways (updated)

  1. Regarding the Massena line, the issue was with interchange restrictions in the agreement put into the agreement by CSX that did not pass STB muster and so fell through.

    CSX was concerned about CN traffic bound for the NY/NJ area going straight through Syracuse to the Susquehanna Railroad – a shorter direct route (one side of the triangle) – rather than being interchanged to CSX at Syracuse and going to Albany and then down the west shore of the Hudson (two sides of the triangle).

    What traffic might that be? Well, a lot of consumer goods are shifting to the east coast for a variety of reasons, including a shift of manufacturing out of China to Southeast Asian countries. Canadian ports are the closest ports to the mouth of the Mediterranean Sea, which is the route ships from Southeast Asia would take to the east coast of North America.

    Halifax has expanded its port. St. John is expanding its port – both served by CN. (St .John will now be served by CSX also.) Montreal and Quebec are looking to significantly expand their container ports.

    Potentially, in the future there could have been be a lot of consumer goods in containers heading down the Massena Line and then down to NY/NJ on the Susquehanna had CN acquired the Massena Line and CSX had not insisted on the interchange restrictions.

  2. From someone who lives up here in Maine and sees it every day, but everyday, Pan Am spends nothing on their main line. It would be all 10 miles an hour if it wasn’t for some of the grants that they’ve got. They are far from a smart business. They’ve let profitable traffic go because they couldn’t serve them right.. Days to get a box car from Waterville to Worcester. CSX is going to be a God’s send up here for the businesses. At least service would be more consistent during an attract and much better shape

  3. I wonder if the rerouting of NS traffic spells the death knell for the storied Hoosac Tunnel route. Certainly, given the volume of traffic, the cost to raise clearances, if even possible in that tunnel, would far outstrip ROI.

    1. It was impossible to raise clearances in that tunnel…and that’s at least one failure of this decision, not mandating a minimum volume of traffic over that route. As much as everyone likes Oberman, he’s still a little timid, the STB absolutely has the right to dictate additional conditions as part of a merger, whether that’s freight related or passenger related…it’s part of the job. As for this being a good deal, you can expect some traffic to be given up to Over The Road truckers, since it won’t fit the PSR model(something else that needs to be addressed). In this instance I would’ve decided against this merger and told Mellon to try again. As for those talking about the annual profits, from what I’ve seen online and in reports, maintenance was sufficient to keep the railroad running…in other words, they spend what they needed to, not deferring anything unless there was insufficient business to warrant expenditure…just like every other smart business out there.

    2. From someone who lives up here in Maine and sees it every day, but everyday, Pan Am spends nothing on their main line. It would be all 10 miles an hour if it wasn’t for some of the grants that they’ve got. They are far from a smart business. They’ve let profitable traffic go because they couldn’t serve them right.. Days to get a box car from Waterville to Worcester. CSX is going to be a God’s send up here for the businesses. At least service would be more consistent during an attract and much better shape

  4. Now that CSX has PanAm, I wonder if they will put the Massena line back up for sale without all of the stupid interchange restrictions.

  5. “Pan Am and Guilford have managed to turn a profit every year.”
    Running a capital intensive business into the ground can produce phony “profits.”
    Ultimately the book cooking runs it’s course and CSX shows up.

    1. I would say yes on running capital intensive business without re investment in such assets would runs things into the ground. No doubt on that one.

      However, for all we know that might have been Guilford’s business plan for better or worse from the start.. If that is the case, it was a well executed business plan if they had free cash flow, net margins/profits and were able to sell to a willing buyer (which they) at their desired point to get out. In other words, capitalism worked for Guilford even though not desireable to non owners

    2. Well, Tim paid all of $40 million for the three (at that time) Class I’s and is now getting $700 million. Even with inflation, that’s a tidy profit. Adjusted for inflation, that $40m would be $126.51m today.
      That equals a 556% return for Mellon. Nice.
      The only real question is if CSX can actually RETAIN what traffic there still is.

  6. Does this mean the transportation industry will have seen the last of the Pan Am name and globe logo?

    1. I doubt it. CSX will probably sell the name and rights off ASAP. They certainly don’t have any use for it. There are always some airline startup that is looking to use the namesake for brand recognition purposes.

      Perhaps Elon Musk will buy the name and stick the logo on one of his Starship’s and fulfill a goal set in the movie “2001: A Space Odyssey”.

    2. Mellon may still have the rights to the name and logo. In any case the name should be sold to the new CPKC which badly needs a new name and it actually finally fits a true Pan-American railroad.

    3. RICHARD – Fascinating thought! I don’t like the CPKC mouthful, seems just to have been a sweetener to get KCS into the deal.

    4. How interesting Mr. Landey. Another off bulls-eye remark from your arm chair insight. Kansas City Southern didn’t utilize your advice and stock option in the KCS/Mexican government railway “sugar plum” negotiations of a deal that actually links North America into a 1990’s – 2022 rail success story. Even though CPKC will likely follow the corporate greed of PSR which is quickly becoming a nightmare from a safety and customer service aspect. The “Route of the Southern Belle” is one of modern railways greatest success stories.
      As I’ve previously tried explaining with you in the past, the Biden Administration has, again, shown their intelligence by nominating (and having Senate confirmation of) former U.S. PATRIOT and mayor, Pete Buttigieg as our Secretary of Transportation. A true example of an honest, public servant who knows what a train is AND the important duties and necessities of
      our nation needs to move commerce and people……and you living in the Detroit area with its RICH transportation history.

    5. RICKY — I had high hopes for Mayor Buttigieg and I said so on these very pages at the time he became SecDOT. Mayor Pete seeemed to me at the time as capable and honest. As far as I can see now, he’s incompetent. I must say I’m disappointed in his performance.

      The only reason I liked Biden (among a thousand reasons to absolutely despise him) was his support for Amtrak. Well, la – dee – dah. Under Joe and Mayor Pete, Amtrak is a complete shambles — far worst than its darkest days under anti – Amtrak Republican presidents like George Bush #2.

      Detroit is a great town. I don’t currently live there and miss it very much.

  7. i wonder how munch freight traffic will see after csx takes over pan am railways and how munch freight traffic will see on csx’s line between Albany, New York and Worcester, Massachusetts when norfolk southern runs on trackage rights in addition to csx’s own freights ?

  8. The STB, led finally by a qualified chairman, is taking charge on several substantive issues. GO Marty— there is much more to do to get the railroads back on track.

    1. Ditto. There has to be someone competent in the Biden administration, one stand-up guy and that’s Martin Oberman. I can’t name a second, certainly not Pete Buttigieg.

    2. HOWARD — From what I see, Oberman is just getting warmed up. Expect some noise out of Oberman on the Gulf Coast, and in re: those briliant brilliances running UPRR. Also those three mile long freight trains that can’t get over the road or into the yard. Also the shippers that the railroads are screwing over.

      Dereg was a great thing (I’m actually a Jimmy Carter fan, not too common among Republicans) …. but the railroads have found a way straight into re-reg. Couldn’t happen to a finer bunch of guys —- these days, a small number of girls also.

    3. Could not agree more about the dislike of government and regulation, but the railroads have managed to dig a very deep hole with way too little foresight and any realistic plan to move forward

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