Florida East Coast Railway (FEC) Sale

Per Trains magazine:

Florida East Coast Railway’s owner is getting ready to put the regional up for sale, according to a Bloomberg News report.

Fortress Investment Group, which purchased the FEC for $3.5 billion in June 2007, has hired investment banking firms Barclays and Morgan Stanley to advise on a potential sale, Bloomberg reported, citing unnamed sources said to be familiar with the matter.
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It is unclear what impact, if any, a potential sale would have on All Aboard Florida’s Brightline passenger project. All Aboard Florida, another Fortress subsidiary, was created to develop a privately funded and operated passenger service that will use FEC tracks between Miami and Cocoa, Fla., and to Orlando via a proposed new route.
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Who died in the Fortress 'brain trust' to plot this change in direction?

More from Bloomberg: Fortress Said to Explore Sale of Florida East Coast Railway

Fortress Investment Group LLC is exploring a sale of Florida East Coast Railway Corp., the coastal freight operator it took private in 2007, according to people familiar with the matter.

Asset manager Fortress is working with Barclays Plc and Morgan Stanley to weigh options for Jacksonville-based Florida East Coast Railway, the people said, asking not to be named as the details aren’t public. The company is likely to attract interest from other private equity firms, infrastructure firms and railway operators, the people said.
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The holding company of Florida East Coast Railway -- Florida East Coast Industries Inc. -- was taken private in 2007 by funds managed by Fortress in a transaction valued at about $3.5 billion. The fund later spun off the railway operations into a separate company, leaving real estate, logistics and telecommunications assets under the FECI umbrella.
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Emphasis added by me. With Brightline, they've monetized the real estate. Now, they can sell the railroad.

This development comes after I backed away from what I suggested FEC was up to back in '10 when AAF was first proposed.

Oh well, someone at Fortress must read this Forum.

Anyone else hold that the State could be interested as I once thought? Mr. Cowford, care to surface?

Funny but yesterday(Friday) I took a ride on Tri-Rail and Metro-Rail and I saw a lot of construction in progress in downtown Miami. I think we need to stay tuned to see what happens down the road.
Noel Weaver

Off Topic...and I just finished 3D printing and painting my bridges.

Well, after I had backed away from my thoughts regarding "fattening up the livestock" for a sale to another party, we now learn what first Bloomberg, followed by TRAINS Newswire, has reported that FEC is up for sale.

The maritime shipping industry is in a "world of hurts" nowadays with much of the hurt thanks to overexpansion. Neo (post) PANAMAX and the East Coast ports that were getting ready to throw the big party could well be looking at a "nobody came". As I noted in one of the earlier topics, the State with its sizeable investment to make the Port of Miami into a major player may wish to have control of the only road serving the Port so that traffic can be forwarded to the "open gateway" of JAX. Let's face it, maritime companies along with other large shippers do not like being at the mercy of one road. As an aside I have to wonder if development of the Port of Lazaro Cardenas, Michaun MX has not been hindered account only one road (KCS-M) serves it. Of course, political instability could be a greater factor.

I can only reiterate the position that any large shipper holds; "we want two roads; we don't want to be held hostage by one".

While some agricultural shippers have long accepted being at the mercy of one road, maritime companies have not. Any established East or West Coast port has always had two, and even three, roads available. This is still the case with only seven Class I's surviving (when I first became interested in industry affairs, i.e. a railfan, there were 112 of such).

But the State of Florida has invested substantial funds to turn their ports into players in the Neo-PANAMAX era - and beyond playing house with Love Tubs. I believe all those ports are at a disadvantage being served by only one road (remember Tampa only has CSX). The best way to ensure those ports stay competitive is to have the one road, FEC, serving them stay independent, yet accessing, in this case, the open gateway of JAX. The State has "walked the walk" with their maritime ports with the Big $$$, along with what Feddybucks they could scrounge (think dredging the Miami channels). Now to protect that investment, best ensure the one road serving them is in their control as well.

One thing of interest at another topic around here; AAF could well be dead if the road is sold to anyone other than the State.

Final thought; we are now three months into the Neo-PANAMAX era. Last week, I drove the NJTurnpike near Elizabeth; awful lot of cranes Skyward, and when I was "down below" this past January, from my hotel room where I pay a premium for a Port of Miami view, all too many cranes were pointing Skyward . Maritime shipping, as exemplified by the Hanjin bankruptcy and Maersk laying up vessels, is starting to resemble the railroad's Dark Ages, circa 1968-to "dereg".

Is there any legal or structural reason why NS and CSX could not use Conrail shared assets to essentially bid jointly for the property?

Why would they want to? CSX already has their own ex-Seaboard route to South Florida via Ocala, Winter Haven & West Palm. It's NS that ends at Jacksonville.

I was thinking both railroads might be interested in having control of their access to the South Florida ports for which FEC is the rail gatekeeper - and CSX particularly would have anti-trust type issues with trying to acquire the whole thing. It would also be a mechanism that would provide the multi carrier access at the ports Mr. Norman refers to for marketability of the port, without the state becoming a freight rail operator. Of course another rail operator (not CSX or NS) not otherwise serving the Florida market could also provide competitive access to both.

Here is far more detail and insight to the proposed FEC sale prepared by a security analyst:

https://www.google.com/amp/seekingalpha ... k-southern" onclick="window.open(this.href);return false;

Fair Use:

..But the wrinkle in all of this would be the competitive advantage that either CSX or Norfolk Southern would gain against the other if one were to win out. Review of any merger between rail operators would involve the Surface and Transportation Board, STB and the Federal Transportation Commission, FTC and Department of Justice, DOJ.

Based upon the Hart-Scott-Rodino Act, HSR Act, I would not think that either the FTC or the DOJ would rule against a deal for either CSX or Norfolk Southern, assuming that there was some sort of agreement with which both Class I's would have access to the South Florida region. I would think that the STB would be more involved in determining whether or not it would be better for FECR to be acquired by a separate operator such as Genesee & Wyoming, or another third party such as a private equity or infrastructure firm..

It appears this analyst is concurring with Mr. VIch's immediate thought. So far as mine, the State is "not on the page".

Video of the first Siemens passenger train being delivered to West Palm Beach.

https://www.youtube.com/watch?v=eEqmZy1nAb0

Who is going to buy FEC?

Gilbert B Norman wrote:But the State of Florida has invested substantial funds to turn their ports into players in the Neo-PANAMAX era - and beyond playing house with Love Tubs. I believe all those ports are at a disadvantage being served by only one road (remember Tampa only has CSX). The best way to ensure those ports stay competitive is to have the one road, FEC, serving them stay independent, yet accessing, in this case, the open gateway of JAX. The State has "walked the walk" with their maritime ports with the Big $$$, along with what Feddybucks they could scrounge (think dredging the Miami channels). Now to protect that investment, best ensure the one road serving them is in their control as well.

Mr. Lake Shore, as I noted this past October, if FEC merged with either CSX or NS, that would be death, other than Love Tubs, for the Florida maritime ports. Maritime companies expect service from two roads, or if one it must have an open interchange such as the FEC and if they can't have it, they'll just steam (whoops, Diesel) on up the Coast until they find a port that does.

But after the flurry of reporting by the financial press, the story has simply gone cold.

Another new wrinkle: http://www.railroad.net/forums/viewtopic.php?f=54&t=164738