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Grupo México seeks STB exemption to acquire FEC
The Mexican railroad operator has applied to the US Surface Transportation Board for an exemption from its review process for the pending acquisition of the Florida East Coast Railway.
Late last month GMéxico Transportes S.A. de C.V.(GMXT), and Florida East Coast Railway Holdings Corp (FEC) announced an agreement under which GMXT will acquire FEC in an all cash transaction valued at US$2.1 billion.
GMXT operates more than 6,200 miles of rail track covering major industrial and commercial zones in Mexico, and now wants to add FEC’s Florida rail line to its US operation, which is currently limited to its ownership of the Texas Pacifico Railroad, a Class III short line operator in Texas.
Headquartered in Jacksonville Florida, FEC is the exclusive provider of rail service to South Florida’s ports—Port Miami, Port Everglades, and the Port of Palm Beach. It provides service across 351 miles of owned track and with connections to CSX and Norfolk Southern in Jacksonville, Florida. Recently FEC has invested in a new Intermodal Container Transfer Facility adjacent to Port Everglades and restoring on-dock rail to the Port of Miami.
There has been some speculation in US media that President Trump, who has announced his intention to renegotiate the North American Free Trade Agreement between the US, Canada and Mexico might look to block the deal.
In a column on the Railway Age website Contributing Editor Frank Wilner noted that the approval process could run very differently to “more conventional political times”.
“We have a President consumed with xenophobia toward Mexico and its citizens, who is easily irked (perhaps even by super-wealthy Mexicans purchasing a railroad in close proximity to his Mar-a-Lago estate), and who has at his command a demonstrably loyal Attorney General capable of constructing innovative legal theories to block the transaction,” Wilner speculated.
The deal needs Surface Transportation Board (STB) approval, and this could be withheld if it views this as necessary to uphold congressional rail transportation policy. GMXT, however, is seeking to avoid a full review and has this week applied to the STB for “an exemption from the prior review and approval requirements”.
GMT has made its application on the basis that adding the FEC network to its existing US asset, the Texas Pacifico Railroad, does not involve two Class I railroads. Therefore, the STB must approve the transaction unless it is likely to lessen competition, create a monopoly, restrain trade or have other anticompetitive effects. This can apply if the transaction is considered to be part of a series of “anticipated transactions” to build a new network through acquisitions.
In its application GMXT states its “acquisition of FECR and continuance in control of FECR and Pacifico is not part of a series of anticipated transactions that would connect those railroads with each other or with any railroad in the GMéxico corporate family”. Furthermore, GMéxico notes “No existing or future shipper will lose rail service or any existing interchange options
as a result of the proposed transaction”.
It is not known when the STB will deliver a decision on the exemption.
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