The Board Approves the CSXT/Pan Am Control and Merger Transaction

On April 14, 2022, the Surface Transportation Board (Board) issued a decision approving the revised application seeking approval for: (1) CSX Corporation (CSXC), CSX Transportation, Inc. (CSXT), and 747 Merger Sub 2, Inc. (747 Merger Sub 2) to control the railroads controlled by Pan Am Systems, Inc. (Systems) and Pan Am Railways, Inc. (PAR); and (2) CSXT to merge certain PAR subsidiaries into CSXT (the Merger Transaction).  CSX Corp.—Control and Merger—Pan Am Systems, Inc., FD 36472 (STB served Apr. 14, 2022).

On February 25, 2021, CSXC, CSXT, 747 Merger Sub 2, Systems, 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 Board approval for the Merger Transaction.  CSX Corp.—Control and Merger—Pan Am Systems, Inc., FD 36472 (filed Feb. 25, 2021). 

Applicants stated that, upon consummation of the Merger Transaction, CSXT would own and control Boston & Maine, which owns 50% of Pan Am Southern LLC (PAS).  Id. at 4.  Applicants also stated that CSXT, Norfolk Southern Railway Company (NSR), and Genesee & Wyoming Inc. (GWI) have entered into agreements that are related to the Merger 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, a GWI subsidiary, would replace Springfield Terminal as the operator of PAS.  Id. at 6-7.

Applicants filed the February 25 application as a “minor” transaction, as defined at 49 C.F.R. § 1180.2(c), stating that the Merger Transaction, as enhanced by the related transactions, clearly would have no adverse impact on competition.  Id. at 8.  On March 25, 2021, the Board issued a decision, finding that the Merger Transaction is a “significant” transaction.  CSX Corp.—Control and Merger—Pan Am Systems, Inc., FD 36472 (STB served Mar. 25, 2021).  Applicants filed an amended “significant” application on April 26, 2021.  On May 26, 2021, the Board issued a decision rejecting the amended application as incomplete.  CSX Corp.—Control and Merger—Pan Am Systems, Inc., FD 36472 (STB served May 26, 2021).  Applicants filed a revised application on July 1, 2021.  On July 30, 2021, the Board issued a decision accepting for consideration the revised application.  CSX Corp.—Control and Merger—Pan Am Systems, Inc., FD 36472 (STB served July 30, 2021).  Numerous parties have filed replies or comments regarding the Merger Transaction and the related transactions.

On December 10, 2021, the Board issued a decision announcing that it would hold a virtual, public hearing in this proceeding.  CSX Corp.—Control and Merger—Pan Am Systems, Inc., FD 36472 (STB served Dec. 10, 2021).  The hearing was held on January 13-14, 2022.  Numerous interested parties presented at the hearing, including applicants CSXT, B&E and NSR; state senators and state representatives; shippers; and parties seeking conditions.  Following the hearing, the Board issued a decision in which it ordered that the record would remain open until January 21, 2022, “to allow parties to supplement their testimony.”  CSX Corp.—Control and Merger—Pan Am Systems, Inc., FD 36472, slip op. at 1 (STB served Jan. 18, 2022).

In its decision served on April 14, 2022, the Board stated that, after considering the entire record in this proceeding, the Board found that the Merger Transaction, “subject to all of the commitments, representations, and voluntary settlement agreements that [CSXT] has requested be imposed as conditions, would not likely cause a substantial lessening of competition, create a monopoly, or restrain trade in freight surface transportation.”  CSX Corp.—Control and Merger—Pan Am Systems, Inc., FD 36472, slip op. at 50 (STB served Apr. 14, 2022).  Additionally, the Board found that “any anticompetitive effects that might be caused by the transaction, in the unlikely event they were to occur, would be outweighed by the public interest in meeting significant transportation needs.”  Id, slip op. at 11.  Thus, the Board concluded that the Merger Transaction meets the criteria for approval under 49 U.S.C. § 11324(d).  Id.,slip op. at 50.  The Board also concluded that the related transactions meet the requisite statutory standards for approval.  Id., slip op. at 2.

The Merger Transaction is subject to various conditions including a five-year oversight period, as requested by Applicants, so that the Board may monitor the effectiveness of the conditions.  Id., slip op. at 49.  The Board noted that, given its finding that the Merger Transaction, as conditioned, would not likely cause a substantial lessening of competition or create a monopoly or restraint of trade, the request by the U.S. Department of Justice for a condition requiring CSXT to divest its 50% ownership of PAS is unwarranted.  Id., slip op. at 50.  Additionally, the Board stated that any other condition requested by a party to this proceeding that is not specifically approved in the decision will be denied.  Id.

The Board’s decision will be effective on May 14, 2022.  Petitions for reconsideration and requests for stay are due by May 4, 2022. 

Share this post: