From the Editor: Short lines are where the acquisition action is

On Aug. 26, global infrastructure investor First State Investments (FSI) announced it reached an agreement with investment manager Steel River Infrastructure Partners to acquire Patriot Rail and Ports, which owns 12 short lines operating across 14 states. Terms were not disclosed.

“The short-line sector, providing essential transportation services to industrial regions in the United States, is a strong fit with First State’s long-term infrastructure investment strategy and mandate,” said John Ma, director of the Sydney, Australia-based FSI infrastructure team, in a prepared statement.

For its first unlisted infrastructure investment in the United States, FSI partnered with MidRail LLC, a firm focused on originating, acquiring and developing rail assets and operations in North America.

FSI manages more than $8 billion worth of unlisted infrastructure investments across the United Kingdom, Europe, Australia, New Zealand and North America, with a focus on mid-market companies in the transportation and utility sectors worldwide. MidRail is led by Gilbert Lamphere, who previously served as chairman of Illinois Central Railway and is co-founder of MidSouth Rail Corp.

“We share a similar vision and outlook with FSI for expanding a sustainable and efficient rail business in North America, and we’re enthusiastic about helping build the Patriot platform,” Lamphere said.

Patriot’s operations include line haul and local rail service, as well as rail-car storage; transloading; rail-car cleaning, scrapping, repair and maintenance; and contract switching. The Patriot ports business provides terminal stevedoring, logistics and warehousing services across nine terminals and two cold storage facilities in the southeast United States.

“More than ever, short-line rail is a key player in the efficient movement of freight in this country,” said Patriot Chief Executive Officer John Fenton, adding that the Patriot team was looking forward to working with FSI to grow the business.

The Patriot deal was yet more evidence that investors from around the globe are digging the short-line scene — they “want North American rail assets,” as independent transportation analyst Tony Hatch put it in his analysis of Brookfield Infrastructure and GIC’s $8.4 billion deal for short-line holding company Genesee & Wyoming Inc. That July deal came on the heels of RailUSA LLC’s June acquisition of the 430-mile Florida Panhandle rail line from CSX Corp., and BRX Transportation Holdings LLC’s May pact to acquire short-line holding company Pioneer Railcorp.

More short-line deals may be coming in what Hatch has termed “The Year of the Short Line.” Short lines certainly will be front and center at this year’s RailTrends conference, which will be held Nov. 21-22 at the New York Marriott Marquis. For more on what’s in store, see Tony’s RailTrends 2019 conference preview. To register, visit railtrends.com.