Daily Rules, Proposed Rules, and Notices of the Federal Government
The Board finds that the application is complete and that the Transaction is a minor transaction upon the preliminary determination that the Transaction clearly will not have any anticompetitive effects. 49 CFR 1180.2(b)(1), (c). The Board makes this determination based solely on the evidence presented in the application. The Board stresses that this is not a final determination, and its finding may be rebutted by filings and evidence submitted into the record for this proceeding. The Board will give careful consideration to any claims that the Transaction would have anticompetitive effects that are not apparent from the application itself.
GWI is a publicly traded, noncarrier holding company. RailAmerica is a publicly traded, noncarrier holding company. See Appendix B for a complete list of each company's relevant holdings.
Applicants state that, pursuant to an agreement and plan of merger (Agreement), Jaguar Acquisition Sub, Inc., a newly formed, wholly owned noncarrier subsidiary of GWI, would acquire control of RailAmerica and its railroad subsidiaries. RailAmerica's shareholders would receive $27.50 per share of RailAmerica common stock.
According to GWI, all shares of common stock of RailAmerica will be placed into an independent voting trust.
Applicants state four primary purposes for pursuing the Transaction. First, Applicants state that expanding GWI's safe and efficient rail operation of regional and shortline railroads would improve customer service for GWI and RailAmerica customers, as well as the Class I railroads with which they connect. Second, Applicants anticipate an increased likelihood of industrial and manufacturing development opportunities in the communities they serve. Third, they seek to enhance operational efficiencies by combining the best practices of each company. Lastly, Applicants assert that the Transaction would create stability for employees and customers.
Applicants assert that the Transaction would have a negligible effect on shippers and the railroad industry and, therefore, has a limited possibility of creating any adverse competitive effects. According to Applicants, the Transaction would not create a monopoly and would not result in any restraint of trade. Applicants note that GWI and RailAmerica currently serve the same customer in only one locality—Linden, Alabama—but they state that no customer there would experience a reduction in service alternatives because the routes of these two carriers have completely opposite orientations and serve distinctly different destinations. In other words, at Linden, a shipper wishing to ship traffic east or west has one option and the same shipper wishing to ship traffic north or south has a different option.
Applicants assert that there would be no “2-to-1 shippers” (i.e., shippers served by two carriers before the Transaction that would be served by one after it) as a result of the Transaction. Applicants state that GWI and RailAmerica railroads interconnect or interchange in only four localities and are in close proximity (five miles or less) in two localities and that the combination would not affect competition at any of those locations. According to Applicants, the Transaction would have no effect on geographic competition. Lastly, Applicants state that the Transaction would not have a detrimental impact on non-affiliated shortlines that connect to GWI and RailAmerica railroads or on any transportation in a transportation corridor.
Applicants assert that, even if the Transaction had any adverse impacts on competition, those effects would be
On August 9, 2012, Napa Valley Railroad Company (NVRR) and Yreka Western Railroad Company (YW) filed replies in opposition to Applicants' Motion To Establish a Procedural Schedule. On August 16, 2012, similar replies were filed by Samuel J. Nasca, for and on behalf of United Transportation Union-New York State Legislative Board (UTU-NY), and jointly by Winamac Southern Railway Company (WSRY) and US Rail Corporation (URC). Opposing parties argue that the Board should treat the Transaction as a significant transaction, pursuant to the applicable statutes and regulations. For example, NVRR and YW argue that, in terms of competition among holding companies, GWI's acquisition of RailAmerica is of national transportation significance. WSRY and URC infer from the numbers (e.g., post-merger GWI would control more than 100 rail carriers, manage in excess of 15,000 miles of track, and handle 1.835 million carloads per year) that this is a matter of regional and national transportation significance. UTU-NY claims that the Transaction would result in a reduction in competition among
The Board finds the proposed Transaction to be a minor transaction, because, as we have noted, on the face of the application there does not appear to be a likelihood of any anticompetitive effects resulting from the Transaction, if approved. Applicants state that the combined GWI and RailAmerica railroads would handle only 2.8% of the carloads handled by freight railroads in the United States and would earn only 1.1% of the total gross freight revenue earned by those railroads. The Transaction involves the common ownership of individual shortlines, each limited in its geographic scope and operating in different areas of the United States. The Transaction, if approved, would alter matters at the administrative level, but Applicants indicate that the existing operating plans governing each railroad would continue unchanged. Thus, those railroads would continue to operate and compete in their own local markets.
Our analysis of the effect on competition appropriately examines not how many railroad holding companies there are, or how many miles they operate, but rather whether the combination would have an adverse effect on shippers and communities. We perform that analysis by looking at the individual serving rail carriers (here, shortline carriers that are not interconnected, with few exceptions), rather than just the holding companies. Based on a review of the application and the careful description of the interchange points, it does not appear that any shipper would have fewer competitive rail alternatives as a result of the Transaction, even in the four localities where GWI interconnects or interchanges with RailAmerica because, as addressed in the application and supporting materials, the relevant lines either run in different directions or the affected shippers are served by multiple railroads.
The Board reiterates, however, that its findings regarding anticompetitive impacts are preliminary. The Board will give careful consideration to any claims that the Transaction would have anticompetitive effects that are not apparent from the application itself. The Board can also condition the Transaction to mitigate or eliminate any deleterious effects on regional or national transportation.
The Board accepts the application for consideration because it is in substantial compliance with the applicable regulations governing minor transactions.
If a request is made in the notice of intent to participate to have more than one name added to the service list as a POR representing a particular entity, the extra name will be added to the service list as a “Non-Party.” The list will reflect the Board's policy of allowing only one official representative per party to be placed on the service list, as specified in Press Release No. 97-68 dated August 18, 1997, announcing the implementation of the Board's “One Party-One Representative” policy for service lists. Any person designated as a Non-Party will receive copies of Board decisions, orders, and notices but not copies of official filings. Persons seeking to change their status must accompany that request with a written certification that he or she has complied with the service requirements set forth at 49 CFR 1180.4, and any other requirements set forth in this decision.
This action will not significantly affect either the quality of the human environment or the conservation of energy resources.
1. The application in FD 35654 is accepted for consideration.
2. The parties to this proceeding must comply with the procedural schedule adopted by the Board in this proceeding as shown in Appendix A.
3. The parties to this proceeding must comply with the procedural requirements described in this decision.
4. This decision is effective on September 5, 2012.
Decided: August 30, 2012.
By the Board, Chairman Elliott, and Commissioner Begeman. Vice Chairman Mulvey dissented with a separate expression.
Congress directed the Board to ensure that certain procedural safeguards are followed when the Board reviews a rail transaction (not involving at least two Class I railroads) that is of “regional or national transportation significance.” 49 U.S.C. 11325(c). Presently before the Board is a request to consolidate GWI and RailAmerica, the two largest shortline holding companies in the country. If approved, more than 100 shortline railroads, operating in 37 states, would be consolidated under a single corporate umbrella. I believe that a transaction of this magnitude is of regional or national transportation significance and, accordingly, should have been classified by the Board as “significant” rather than “minor.” A “significant” classification would have given interested parties and the Board more information and opportunity to examine any concerns regarding the transaction.
While I do not believe that every large transaction merits a significant classification, the proposed transaction would greatly change the ownership structure of the short line industry. In the past, this agency has been criticized by some for allowing, over time and many individual transactions, significant consolidation of the Class I railroad industry. Although there remain many other shortline railroads today, the present transaction would consolidate nearly 20% of the shortlines in the country under a single owner.
This agency has only once found a transaction to be significant.
Although I would have classified the merger as being of regional or national transportation significance, based on the current record, I do not see an issue that would have prevented the Board from completing its review in less time than allotted for significant mergers.
According to GWI, it controls, within the United States, one Class II rail carrier, Buffalo & Pittsburgh Railroad, Inc., and 59 Class III rail carriers:
• Allegheny and Eastern Railroad, LLC;
• The Aliquippa and Ohio River Railroad Co.;
• AN Railway, LLC;
• Arizona Eastern Railway Company;
• Arkansas Louisiana & Mississippi Railroad Co.;
• Atlantic and Western Railway, LP;
• The Bay Line Railroad, LLC;
• Chattahoochee Bay Railroad, Inc.;
• Chattahoochee Industrial Railroad;
• Chattooga and Chickamauga Railway Co.;
• Columbus & Chattahoochee Railroad, Inc.;
• Columbus and Greenville Railway Co.;
• The Columbus and Ohio River Rail Road Co.;
• Commonwealth Railway, Inc.;
• Corpus Christi Termini Railroad, Inc.;
• The Dansville and Mount Morris Railroad Co.;
• East Tennessee Railway, LP;
• First Coast Railroad Inc.;
• Fordyce and Princeton RR Co.;
• Galveston Railroad, LP;
• Genesee and Wyoming Railroad Co.;
• Georgia Central Railway, LP;
• Georgia Southwestern Railroad, Inc.;
• Golden Isles Terminal Railroad, Inc.;
• Hilton & Albany Railroad, Inc.;
• Illinois & Midland Railroad, Inc.;
• KWT Railway, Inc.;
• Little Rock & Western Railway, LP;
• Louisiana and Delta Railroad, Inc.;
• Luxapalila Valley Railroad, Inc.;
• The Mahoning Valley Railway Co.;
• Maryland and Pennsylvania Railroad, LLC;
• Maryland Midland Railway, Inc.;
• Meridian & Bigbee Railroad, LLC;
• Ohio and Pennsylvania Railroad Co.;
• Ohio Central Railroad, Inc.;
• Ohio Southern Railroad, Inc.;
• Pittsburg & Shawmut Railroad, LLC;
• The Pittsburgh & Ohio Central Railroad Co.;
• Portland & Western Railroad, Inc.;
• Riceboro Southern Railway, LLC;
• Rochester & Southern Railroad, Inc.;
• Salt Lake City Southern Railroad Co., Inc.;
• Savannah Port Terminal Railroad Inc.;
• South Buffalo Railway Co.;
• St. Lawrence & Atlantic Railroad Co.;
• Talleyrand Terminal Railroad Co., Inc.;
• Tazewell & Peoria Railroad, Inc.;
• Tomahawk Railway, LP;
• Utah Railway Co.;
• Valdosta Railway, LP;
• The Warren & Trumbull Railroad Co.;
• Western Kentucky Railway, LLC;
• Willamette & Pacific Railroad, Inc.;
• Wilmington Terminal Railroad, LP;
• York Railway Co.;
• Yorkrail, LLC;
• The Youngstown & Austintown Railroad, Inc.; and
• Youngstown Belt Railroad Co.
GWI explains that Allegheny & Eastern Railroad, LLC and Pittsburg & Shawmut Railroad, LLC are non-operating carriers that own rail lines operated by Buffalo Pittsburgh Railroad, Inc.; and, Maryland and Pennsylvania Railroad, LLC and Yorkrail, LLC are also non-operating carriers that own rail lines operated by York Railway Company. The Board recently granted Western Kentucky Railway, LLC authority to abandon all of its remaining rail lines that have been inactive since prior to 2005.
According to RailAmerica, it operates the following Class III railroads:
• Alabama & Gulf Coast Railway LLC;
• Arizona & California Railroad Co.;
• Bauxite & Northern Railway Co.;
• California Northern Railroad Co.;
• Carolina Piedmont Division;
• Cascade and Columbia River Railroad Co.;
• Central Oregon & Pacific Railroad, Inc.;
• The Central Railroad Company of Indiana;
• Central Railroad Company of Indianapolis;
• Chesapeake & Albemarle Railroad Co., Inc.;
• Chicago, Ft. Wayne & Eastern;
• Conecuh Valley Railway;
• Connecticut Southern Railroad, Inc.;
• Dallas, Garland & Northeastern Railroad, Inc.;
• Eastern Alabama Railway, LLC;
• Grand Rapids Eastern Railroad Inc.;
• Huron & Eastern Railway Company, Inc.;
• Indiana & Ohio Railway Company;
• Indiana Southern Railroad, LLC;
• Kiamichi Railroad Co., LLC;
• Kyle Railroad Co.;
• Marquette Rail, LLC;
• The Massena Terminal Railroad Co.;
• Mid-Michigan Railroad, Inc.;
• Michigan Shore Railroad, Inc.;
• Missouri & Northern Arkansas Railroad Co., Inc.;
• New England Central Railroad, Inc.;
• North Carolina & Virginia Railroad Co., LLC;
• Otter Tail Valley Railroad Co., Inc.;
• Point Comfort & Northern Railway Co.;
• Puget Sound & Pacific Railroad; Rockdale,
• Sandow & Southern Railroad Co.;
• San Diego & Imperial Valley Railroad Co., Inc.;
• San Joaquin Valley Railroad Co.;
• South Carolina Central Railroad Co., LLC;
• Texas Northeastern Railroad;
• Three Notch Railway, LLC;
• Toledo, Peoria & Western Railway Corp.;
• Ventura County Railroad Corp.;
• Wellsboro & Corning Railroad, LLC; and
• Wiregrass Central Railway, LLC.
RR Acquisition Holding, LLC, a noncarrier affiliate of Fortress Investment Group, currently owns approximately 60% of RailAmerica's publicly traded shares.