The Surface Transportation Board Finds that CSXT & Pan Am’s Proposed Control and Merger Transaction is “Significant”

On February 25, 2021, CSX Corporation (CSXC), CSX Transportation, Inc. (CSXT), 747 Merger Sub 2, Inc. (747 Merger Sub 2), Pan Am Systems, Inc. (Systems), Pan Am Railways, Inc. (PAR), Boston and Maine Corporation (Boston & Maine), Maine Central Railroad Company, Northern Railroad, Portland Terminal Company, Springfield Terminal Railway Company (Springfield Terminal), Stony Brook Railroad Company, and Vermont & Massachusetts Railroad Company (collectively, Applicants), filed an application pursuant to 49 U.S.C. §§ 11323(a)(1), (3), (4), and (5) and 49 C.F.R. Part 1180, seeking approval from the Surface Transportation Board (Board) for: (1) CSXC, CSXT, and 747 Merger Sub 2 to control the railroads controlled by Systems and PAR; and (2) CSXT to merge certain PAR subsidiaries into CSXT.  CSX Corp.—Control and Merger—Pan Am Systems, Inc., FD 36472 (filed Feb. 25, 2021). 

Upon consummation of the proposed transaction, CSXT would own and control Boston & Maine, which owns 50% of Pan Am Southern LLC (PAS).  Id. at 4.  Applicants stated that CSXT, Norfolk Southern Railway Company (NSR), and Genesee & Wyoming Inc. (GWI) have entered into agreements that are related to the proposed transaction and that require authority from the Board.  Id. at 4-5.  Pursuant to the related transactions, (1) NSR would obtain trackage rights over existing lines owned by four railroads (CSXT, Boston & Maine, Providence & Worcester Railroad Company (a GWI subsidiary), and PAS); and (2) Pittsburg & Shawmut Railroad, LLC, doing business as Berkshire & Eastern Railroad (B&E), a GWI subsidiary, would replace Springfield Terminal as the operator of PAS.  Id. at 6-7.

Applicants filed the application as a “minor” transaction, as defined at 49 C.F.R. § 1180.2(c), stating that the proposed transaction, as enhanced by the related transactions, clearly will have no adverse impact on competition.  Id. at 8.

Multiple parties, including railroads, shippers, and government agencies and officials, have submitted filings to the Board regarding the transaction.  Several parties stated that the Board should classify the transaction as a “significant” transaction.

On March 25, 2021, the Board issued a decision, finding that the proposed transaction would be a “significant” transaction.  CSX Corp.—Control and Merger—Pan Am Systems, Inc., FD 36472 (STB served Mar. 25, 2021).  The Board noted that, under 49 C.F.R. § 1180.2, a transaction that does not involve two or more Class I railroads is classified as a “minor” transaction if a determination can be made that: (1) the transaction clearly will not have any anticompetitive effects; or (2) any anticompetitive effects will clearly be outweighed by the transaction’s anticipated contribution to the public interest in meeting significant transportation needs.  Id., slip op. at 8.  According to the Board, the test articulated in § 1180.2 is intended to allow the Board to lessen the regulatory burden when a determination can clearly be made, at the time that an application is submitted, that a proposed transaction passes muster under the statute.  Id., slip op. at 9.  Here, the Board concluded that it could not make the determination that the proposed transaction clearly would not have any anticompetitive effects, based on the current record.  Id., slip op. at 10.

The Board stated that it will consider the Applicants’ February 25 submission a prefiling notification of the anticipated application, and it “will permit Applicants to perfect their application by supplementing their submission with the requisite information for a ‘significant’ transaction . . . between April 25 and June 25, 2021.”  Id., slip op. at 2.  The Board directed Applicants to file a revised procedural schedule reflecting the Board’s determination that the transaction is “significant,” which Applicants filed on April 1, 2021.

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