Feds rule sale of Maine's largest railroad is 'significant,' delaying acquisition
Photo / Maureen Milliken
The purchase of Pan Am Railways, including a train passing this winter through Fairfield, may have to wait until 2022 for potential approval. The deal has drawn criticism from officials in Massachusetts and Vermont.
The sale of Maine’s largest railroad is running late, but may still be on track.
The federal Surface Transportation Board has ruled that the pending purchase of Pan Am Railways by CSX Corp. (Nasdaq: CSX) is a “significant” transaction, potentially delaying the close of the deal until next year.
“It will likely be early 2022 before a final decision from the STB and the transaction can close,” Nate Moulton, director of freight rail for the Maine Department of Transportation, told Mainebiz on Monday.
After Pan Am went up for sale last July, CSX announced plans to acquire the regional railroad, which is headquartered in Billerica, Mass., and has over 1,700 miles of track including 300 miles in Maine. While no price was disclosed, industry analysts speculated the deal might be worth as much as $700 million and that it would close this fall.
The deal requires approval of the Surface Transportation Board, and CSX had requested that the agency treat the purchase as a “minor transaction” that doesn’t have to undergo the more stringent review process of larger deals.
But the request drew sharp rebukes from some lawmakers and transportation officials in Massachusetts and Vermont, who said the acquisition would reduce competition among freight carriers and adversely affect passenger rail service in the region.
“The board cannot make the determination that the transaction clearly would not have any anticompetitive effects, based on the current record,” the STB wrote in its March 25 ruling. “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.”
Under federal law, the STB classifies railroad mergers as “major,” “significant,” “minor,” or “exempt,” and those distinctions determine the length and level of its scrutiny for proposed transactions.
The Pan Am purchase could have been considered either “significant” or “minor” but not “major,” which applies only to transactions among the seven large Class I railroads in the U.S.
Pan Am is a regional, Class II railroad. CSX, one of North America’s largest railroads, is a Class I, with 20,000 miles of track and service in every state east of the Mississippi River except Maine, New Hampshire and Vermont.
The sale would fill that gap and broaden the railroad’s reach in Connecticut, New York and Massachusetts.
The CSX application for a “minor” transaction approval will count as the required prefiling notice for a “significant” one, the board said. The date of the application, followed by a required waiting period, means that CSX can submit the new application as soon as next week. The STB said a merger of this type is typically reviewed within 10 months of the completed application.
If the acquisition is successful, it’s not clear whether there would be any changes to Pan Am freight services in Maine or along the 79 miles of Pan Am track used by the Amtrak Downeaster passenger rail service.
“We are confident that there are opportunities for CSX to make select investments in Pan Am’s system to support growth and improved service and safety,” a CSX spokeswoman told Mainebiz in December. “CSX commits to maintain or improve existing passenger service across the Pan Am system. CSX’s industry-leading operating model benefits passenger carriers as well as shippers.”
Despite the objections elsewhere in New England, Moulton has said Maine is open to the CSX deal and remains optimistic about its outcome.
“We were not particularly surprised at the decision to deem [the sale] significant,” he said Monday. “While it adds some additional time and scrutiny, we are not concerned at this point that the transaction is in any jeopardy.”
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