Gabelli Funds has acquired >10% P&W stake

Topics relating to the operation of the P&W Railroad, which is a subsidiary of Genesee and Wyoming. Regional freight railroad based in Worcester and operating in Massachusetts, Rhode Island, Connecticut and New York.
Official web-site: http://www.pwrr.com/

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Gabelli Funds has acquired >10% P&W stake

Postby johnpbarlow » Mon Jan 25, 2016 6:42 am

Here are a few P&W ownership related articles discussing events that have occurred in the past few weeks wrt health of CEO Robert Eder, primary shareholder of P&W, and Gabelli Funds' purchase of 10% of P&W shares:

http://corvuswire.com/2016/01/23/providence-worcester-railroad-company-pwx-stake-owned-by-gabelli-funds-llc-id-no-134044523/765785/

http://www.streetinsider.com/Corporate+News/Providence+%26+Worcester+Railroad+Company+(PWX)+CEO+Sustains+Head+Injury+after+Hike/11178485.html

http://seekingalpha.com/article/3795856-providence-and-worcesters-governance-issues-present-a-bittersweet-opportunity

Net: primary stock holder, Robert Eder, is in his 80's but just sustained a head injury at the end of December serious enough to warrant a P&W press release about his health. FWIW,there is commentary from anonymous person in the Seeking Alpha article that as Eder has been "basically been running the company since 1966 and oversaw its extraction from Penn Central", it's unlikely P&W will merge with another RR as long as he is involved. As P&W stock is viewed by some as having upside at its current price, perhaps Gabelli senses something is on the horizon for P&W.

P&W's latest 10-Q filing (Nov 12, 2015 for Q3 '15) has some interesting tidbits in the operating revenues discussion that I interpret as being influenced by increased NS/PAS interchange at Gardner observed over the past year:

Operating revenues increased $1.2 million, or 4.9%, to $25.7 million in the nine months ended September 30, 2015 from $24.5 million in 2014. This increase is the result of a $1.4 million (6.3%) increase in conventional freight revenues and a $187 thousand (42.2%) increase in other freight related revenues, offset by a $174 thousand (15.1%) decrease in container freight revenues and a $158 thousand (18.7%) decrease in other operating revenues. The increase in conventional freight revenues results from a 12.6% increase in traffic volume, offset by a 5.6% decrease in the average revenue received per conventional carload, The Company’s conventional carload increased by 3,183 to 28,475 in the first nine months of 2015 from 25,292 in 2014.
The number of shipments of most commodities handled by the Company increased. The majority of the increase was attributable to shipments of automobiles, chemicals (including ethanol), and metal and construction products. This increase was offset, in part, by decreases in shipments of other commodities. The decrease in the average revenue received per conventional carload is due to a shift of the mix of commodities, the origin of the shipments, and decrease in fuel surcharge revenue.
The decrease in container freight revenues is mainly the result of a 13.4% decrease in traffic volume. Container traffic volume decreased by 2,147 containers to 13,917 containers in the first nine months of 2015 from 16,064 containers in 2014 as a result of more international freight being transloaded at the west coast ports to domestic containers, as well as some rate changes.


So maybe P&W property will be in play soon? An Ackman-like play to change P&W board at a vulnerable time and seek a sale? Possible suitors: NS? G&W? Iowa Pacific?
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Re: Gabelli Funds has acquired >10% P&W stake

Postby MEC407 » Mon Jan 25, 2016 10:56 am

Thanks for posting this information!

P&W strikes me as exactly the type of railroad G&W likes to own. Hard to imagine them not being interested.
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Re: Gabelli Funds has acquired >10% P&W stake

Postby FLRailFan1 » Sat Jan 30, 2016 11:31 pm

MEC407 wrote:Thanks for posting this information!

P&W strikes me as exactly the type of railroad G&W likes to own. Hard to imagine them not being interested.


I'm not sure if I'd want the G&W owning the P&W. I love the colors of P&W locos and G&W's locos are the same...(I loved the NECR's blue yellow livery myself).
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Re: Gabelli Funds has acquired >10% P&W stake

Postby BostonUrbEx » Sun Jan 31, 2016 12:03 pm

You're basing your ownership preference on locomotive livery???
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Re: Gabelli Funds has acquired >10% P&W stake

Postby FLRailFan1 » Mon Feb 01, 2016 7:18 pm

BostonUrbEx wrote:You're basing your ownership preference on locomotive livery???


No. It is going to be boring if P&W, CSO and NEC will have the same colors. Myself, if they do merge, maybe,the CNEZ will get the East Hartford branch (with the rest of the Armory branch). Maybe, CSO can get free from the paper work...by having P&W merge CSO.

Oh well...
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Re: Gabelli Funds has acquired >10% P&W stake

Postby YamaOfParadise » Mon Feb 01, 2016 9:58 pm

Certainly would be a bummer livery-wise, but it makes sense strategically for G&W.

I found it odd that P&W was noted to have "[p]oor operating economics due to higher-than-industry labor expenses as a percentage of operating revenue" in that seekingalpha link. But it'd odd that "its peers" for comparison there are all railroads several scales of magnitude larger, and the way this scales with larger operations isn't a linear 1:1 ratio. But at the same time that's why they bring up that by only that number, P&W buy->consolidate grab to profit; that non-linear ratio is why it's profitable to merge and streamline.

Dunno if that'll happen, though, since as they point out, Eder owns most of the preferred stock; and common stock holders only get to elect 1/3rd of the vote, the other 2/3rds being voted in by the preferred holders. Pretty telling:
What does this mean for the common shareholder? In short, it means that the shareholder's vote doesn't matter. In the event that a shareholder wealth maximizing buyout offer is made, it can very well be turned down at Mr. Eder's discretion. While I'm not saying that this is what will happen, it's certainly a risk worth noting for the investor. Considering that Robert Eder doesn't really have a public profile and PWX doesn't have any earnings calls, it's hard to figure out how Mr. Eder approaches business. If this is a risk that is tolerable for the investor, PWX is worth considering. Otherwise, I'd stay away.


So Eder still is steering the ship, and what he says has the final matter. What happens to his stocks after his inevitable passing in the next couple decades is really what's going to determine that. Wonder if he has children, and if so, if they're fit or interested to inherit his legacy.
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Re: Gabelli Funds has acquired >10% P&W stake

Postby johnpbarlow » Sun Feb 21, 2016 9:44 am

At end of 2015, Steinberg Asset Management Llc Reported increased Interest in Providence & Worcester Railroad Co:

http://www.fdanewsalert.com/steinberg-asset-management-llc-recently-increased-its-providence-worcester-railroad-co-position/8516204/

Perhaps given PWX share price has declined approx 25% since July 2015 and under-performed the S&P500 index by 15%, some institutional investors must think the stock is now a buy?
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Re: Gabelli Funds has acquired >10% P&W stake

Postby ccutler » Sun Feb 21, 2016 3:39 pm

IIRC, P&W has an unusual corporate charter that grants ALL shareholders, regardless of their shareholding, one vote. Thus, Gabelli at a 10% stake gets the same vote as I would if I owned only 100 shares. So any merger would have to be consensual. P&W used this voting structure to regain control from and exit from PC in the 1960s, even though PC owned a majority of the shares, likely saving most of the trackage from abandonment/mismanagement by managers focused primarily on large shippers only.

So if P&W management after the current President's term "ends" wants to stay independent, they can do so, until they are offered a ridiculous golden parachute at the expense of shareholders and employees.
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