Two major short-line operators merge

By Staff -- Logistics Management, 4/1/2000

Earlier this year, while all eyes were turned to the proposed merger between the Canadian National Railway and the Burlington Northern Santa Fe Railroad, another smaller but significant railroad merger was completed.

In February, RailAmerica Inc., headquartered in Boca Raton, Fla., acquired RailTex Inc. of San Antonio, Texas. The acquisition created the world's largest operator of short-line and regional railroads, encompassing 50 railroads with more than 12,500 route miles in the United States, Canada, Australia, and Chile.

The deal was the latest of several strategic acquisitions by RailAmerica. In 1999, the company purchased the E & N Railway on Vancouver Island, British Columbia; Canada's regional RaiLink system; and the Toledo, Peoria & Western Railroad in the U.S. Midwest. Those acquisitions contributed to RailAmerica's record results in 1999, increasing total annual revenues by 121 percent over 1998's figures to $170.2 million and annual net income by 124 percent to $9.9 million.

The Surface Transportation Board quickly approved the proposed purchase. In its decision, the board noted that it received no petitions or other communications opposing the deal. In fact, the board received more than 100 letters supporting the acquisition.

Profits at RailTex, which owned 26 short lines and regional carriers in the United States, Canada, and Mexico, had been declining, and longtime chairman Bruce Flohr and President Henry Chidgey both left the company in recent years. Ronald Rittenmeyer, the current chairman, president, and CEO, will stay on as a consultant to the new owners.