CSX bid to acquire Pan Am Railways raises concern
Norfolk Southern challenges plan, citing ‘competitive harm’
As CSX Transportation continues talks with Pan Am Railways to acquire its 1,700 miles of track in New England — including 121 miles in New Hampshire — Norfolk Southern Railway has told federal regulators it will oppose the transaction, claiming which it will stifle competition, with adverse impacts on other railroads and commercial shippers in New England.
According to Anthony Hatch, a longtime railroad analyst on Wall Street, the Canadian Pacific Railway and Genesee & Wyoming Inc., owner of 116 short-line railroads — including the St. Lawrence & Atlantic Railroad in northern New Hampshire — are also interested in Pan Am.
Pan Am and Norfolk Southern are partners in a $140 million joint venture known as Pan Am Southern, which provides Norfolk Southern access to New England by way of trackage rights on the 437 miles of the “Patriot Corridor” between Mechanicsville, N.Y., and Ayer, Mass.
Earlier this week the counsel for Norfolk Southern, Michael Rosenthal of Covington & Burling, reminded the Surface Transportation Board, the federal agency responsible for regulating rail freight carriers, it approved the joint venture in 2009 as a means of enhancing competition among freight carriers in New England.
The board found the joint venture “would significantly increase competition between railroads by providing an upgraded east-west main line route to compete with a parallel main line route operated by CSXT,” he said. “Any CSXT effort to acquire Pan Am would threaten to materially undermine this competition, thus impacting not only NSR, but also rail shippers and other railroads.”
Rosenthal also challenged CSX’s intent to use a voting trust to acquire Pan Am. With a voting trust, Pan Am’s voting shares would be placed with a neutral trustee that would maintain the independence of the two railroads while the STB reviews the proposed merger.
Rosenthal contended that CSX could not use a voting trust without the approval of the Surface Transportation Board, which is required for any entity other than a rail carrier to acquire control of two or more railroads. By forming a voting trust, he explained, CSXT’s trustee would control two railroads — Pan Am and Pan Am Southern — which, given Norfolk Southern’s interest in Pan Am Southern, do not operate as a single system.
Consequently, Rosenthal told the board, “the competitive harm in this case would begin as soon as Pan Am is placed into a voting trust.”
James A. Squires, chairman, president and CEO of Norfolk Southern, is a native of Hollis and the son of physician, former state senator and gubernatorial candidate Jim Squires, who founded the Matthew Thornton Health Plan.
Headquartered in Billerica, Mass., Pan Am Railways is a privately held company owned by Timothy Mellon, heir to the Mellon family fortune, and other investors.
It provides freight service in Massachusetts, New York, Connecticut, Maine and Vermont as well as New Hampshire. Its rails connect to the Canadian National Railway, Canadian Pacific Railway, CSX and Norfolk Southern Railway as well as 20 other regional and shortline systems.
In New Hampshire, Pan Am owns or operates five railway lines. The Pan Am Railways Main Line runs 35 miles between Plaistow and Rollinsford, carrying the Amtrak Downeaster between Boston and Portland, Maine, with stops in Exeter, Durham and Dover. The New Hampshire Main Line stretches more than 40 miles from Nashua to Concord and carries three-quarters of all freight (by weight) reaching the state by rail.
Perhaps most significantly, the main line runs within the Capitol Corridor, the preferred route for extending passenger rail service from greater Boston to Nashua, Manchester and perhaps Concord.
The 12-mile Hillsboro Branch, known as “the Hillsboro Running Track,” connects Nashua and Wilton and to the state-owned line, operated by the Milford-Bennington Railroad that extends the service 18 miles to Bennington.
On the Seacoast, Pan Am owns and operates the 10 miles of track between Portsmouth and Newfields and another 3.5 miles of track between Portsmouth and Newington. The company has indicated it intends to abandon the Hampton Branch, which runs 10 miles between Portsmouth and Hampton.
Pan Am holds haulage rights on the 394 miles of the Connecticut River Line between the Canadian border and New London, Conn., which includes 24 miles of track in New Hampshire between Walpole and Cornish.