Notice2025-16910
Watco Holdings, Inc.-Acquisition of Control Exemption-Great Lakes Central Railroad, Inc.
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
September 4, 2025
Issuing agencies
Surface Transportation Board
Full Text
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<title>Federal Register, Volume 90 Issue 169 (Thursday, September 4, 2025)</title>
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[Federal Register Volume 90, Number 169 (Thursday, September 4, 2025)]
[Notices]
[Pages 42784-42786]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-16910]
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SURFACE TRANSPORTATION BOARD
[Docket No. FD 36843]
Watco Holdings, Inc.--Acquisition of Control Exemption--Great
Lakes Central Railroad, Inc.
On March 6, 2025, Watco Holdings, Inc. (Watco), a noncarrier
holding company, filed a petition under 49 U.S.C. 10502, seeking an
exemption from the prior approval requirements of 49 U.S.C. 11323 to
acquire control of Great Lakes Central Railroad, Inc. (GLC), a Class
III rail carrier, by acquiring 100% of GLC's common stock. After
finding the original petition deficient, the Board on May 30, 2025,
directed Watco to supplement its petition with additional information
needed to determine whether the transaction qualifies for an exemption
under 49 U.S.C. 10502(a). Watco Holdings, Inc.--Acquis. of Control
Exemption--Great Lakes Cent. R.R. (May 2025 Decision), FD 36843 (STB
served May 30, 2025). Watco filed a supplement containing the requested
information and material on June 20, 2025. The Board will grant Watco's
petition for exemption, subject to standard labor protective
conditions.
Background
Watco currently controls one Class II rail carrier and 43 Class III
rail carriers across the United States.\1\ (Pet. 2.) GLC is a Class III
rail carrier currently owned by Federated Capital Acquisitions, Inc.
[[Page 42785]]
(FCA), a subsidiary of Federated Capital Holdings, LLC (FCH), and
operates approximately 379.2 miles of line located entirely within the
State of Michigan. (Pet. 1; Suppl. 3.) According to Watco, the state
owns about 350 miles of GLC's lines, and GLC operates over these lines
via modified certificates of public convenience and necessity.\2\ (Id.)
Watco states that approximately 33.18 miles of GLC's network are
currently inactive due to a lack of traffic demand. (Id. at 4.)
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\1\ A full list of railroads currently controlled by Watco is
appended to the petition as Exhibit C.
\2\ GLC acquired the modified certificates under its prior name,
Tuscola and Saginaw Bay Railway Company, Inc. (Pet. 3.) FCH changed
the railroad's name to GLC in 2006. (Id.)
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Pursuant to a purchase agreement, Watco has agreed to acquire all
GLC common stock from FCA. (Pet. 1; Suppl. 1.) Upon consummation of the
transaction, Watco would control GLC, which connects with the Watco-
owned Ann Arbor Railroad (AA) near Ann Arbor, Mich.\3\ (Pet. 3.) Watco
asserts that although AA's lines connect with GLC, this transaction
will not result in reduced options for shippers because GLC and AA do
not serve any facilities in common, (id.), nor are GLC and AA
competitors for traffic in the greater Ann Arbor area, (Suppl. 7-8).
Watco additionally states that it will not use the connection between
AA and GLC to foreclose efficient, existing GLC joint line routes with
unaffiliated carriers, and that it expects the Board to hold it to this
representation. (Id. at 12.) Watco further notes that AA's interchange
commitment with Norfolk Southern Railway Company (NS) in Toledo, Ohio,
will not incentivize Watco to direct GLC traffic to NS instead of other
carriers. (Id.)
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\3\ Watco explains that the transaction does not qualify for the
class exemption under 49 CFR 1180.2(d)(2) for this reason.
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In support of its petition, Watco states that it is committed to
implementing service improvements on GLC and modernizing GLC's
infrastructure following the transaction. (Id. at 9, 20-21.) Watco
asserts that the transaction will not reduce the competitive options
for shippers, as the transaction will not allow it to engage in
anticompetitive behavior such as closing gateways or forcing shippers
onto more inefficient routes. (Id. at 10-12.) Rather, according to
Watco, shippers will benefit from greater service efficiencies
resulting from the acquisition. (Pet. 7.) Watco further notes that
prompt and favorable action on its petition is essential for Watco to
invest capital and implement service improvements and expansion and
therefore requests that the Board handle the petition expeditiously.
(Suppl. 22.) A letter from the Michigan Department of Transportation in
support of the transaction is attached to the petition. (See Pet., Ex.
B.) No other comments on the proposed transaction were filed.
Discussion and Conclusions
The acquisition of control of a rail carrier by a person that is
not a rail carrier but that controls any number of rail carriers
requires prior approval from the Board under 49 U.S.C. 11323(a)(5).
Under 49 U.S.C. 10502(a), however, the Board shall, to the maximum
extent consistent with 49 U.S.C. subtitle IV, part A, exempt a
transaction or service from regulation when it finds that: (1) the
regulation is not necessary to carry out the rail transportation policy
(RTP) under 49 U.S.C. 10101; and (2) either (a) the transaction or
service is of limited scope, or (b) regulation is not needed to protect
shippers from the abuse of market power.
An exemption from the prior approval requirements of 49 U.S.C.
11323-25 in this case is consistent with the standards of 49 U.S.C.
10502. Detailed scrutiny of the proposed transaction through an
application for review and approval under sections 49 U.S.C. 11323-25
is not necessary to carry out the RTP. Permitting Watco to acquire
control of GLC without having to file an application would promote the
RTP by minimizing the need for federal regulatory control over the
proposed transaction, 49 U.S.C. 10101(2); reducing regulatory barriers
to entry into and exit from the industry, 49 U.S.C. 10101(7); and
providing for the expeditious resolution of this proceeding, 49 U.S.C.
10101(15). Additionally, Watco explains that its acquisition of control
of GLC will create streamlined routing efficiencies between GLC and AA,
allow GLC to gain access to Watco's experienced marketing team, and
allow Watco to invest approximately $3.7 million in GLC's network.
(Supp. 20.) Accordingly, granting the exemption would also ensure the
development and continuation of a sound rail transportation system that
would continue to meet the needs of the public, 49 U.S.C. 10101(4);
foster sound economic conditions in transportation, 49 U.S.C. 10101(5);
and encourage efficient management, 49 U.S.C. 10101(9). Lastly, as
discussed below and subject to the representation condition imposed in
this decision, the Board finds that there will be no significant
impacts on competition as a result of the transaction. Accordingly,
other aspects of the RTP would not be adversely affected.
Regulation of the proposed transaction is not necessary to protect
shippers from an abuse of market power.\4\ Although GLC already
connects with AA, a Watco-owned carrier, Watco maintains that there
would not be a reduction in options for shippers resulting from the
acquisition. (Pet. 3.) The May 2025 Decision raised a concern that the
connection between GLC and AA would give Watco an incentive to redirect
traffic currently moving to gateways with other competing carriers. May
2025 Decision, FD 36843, slip op. at 1-2 (noting that GLC connects to
five rail carriers in addition to AA). In its supplement, however,
Watco states that it ``commits to keeping all currently-active GLC and
AA gateways open on commercially competitive terms commensurate with
future traffic volumes, shipper demand, and subject to the cooperation
of third-party interline partners in facilitating traffic movements via
such existing gateways.'' (Suppl. 12.) As it has in other transactions,
the Board will impose a condition holding Watco to this
representation.\5\ The May 2025 Decision also noted that the existing
interchange commitment between AA and NS at Toledo might give Watco
even greater incentive to direct GLC to route traffic to NS via AA. May
2025 Decision, FD 36843, slip op. at 2. In addition to addressing this
concern by its gateway commitment, Watco satisfactorily explains in its
supplement why the terms and application of the interchange commitment
between AA and NS will not in fact incentivize anticompetitive or
inefficient practices.\6\ Finally, there have been no objections to the
proposed transaction, and the State of Michigan has written a letter in
support of the acquisition. (See Pet., Ex. B.) Based on the record,
including the additional information provided by Watco in its
supplement, the Board finds that the transaction meets the requirements
for an exemption under 49 U.S.C. 10502.
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\4\ Given this finding, the Board need not determine whether the
transaction is limited in scope. See 49 U.S.C. 10502(a).
\5\ For clarity, the Board has made minor adjustments to the
language of this representation in the ordering paragraph below.
\6\ Most of Watco's explanation is based on confidential terms
of the interchange commitment between AA and NS, which are
designated as highly confidential. The Board has described its
rationale in general terms above.
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Under 49 U.S.C. 10502(g), the Board may not use its exemption
authority to relieve a rail carrier of its statutory obligation to
protect the interests of its employees. Because the transaction
involves one Class II and one or more Class III rail carriers, the
exemption will be made subject to the labor protection
[[Page 42786]]
requirements of 49 U.S.C. 11326(b) and Wisconsin Central Ltd.--
Acquisition Exemption--Lines of Union Pacific Railroad, 2 S.T.B. 218
(1997).
The acquisition of control is exempt from environmental reporting
requirements under 49 CFR 1105.6(c)(1) because it will not result in
significant changes in carrier operations. Similarly, under 49 CFR
1105.8(b)(3), no historic reporting is required because the proposed
transaction will not substantially change the level of operations or
maintenance of railroad properties.
It is ordered:
1. Under 49 U.S.C. 10502, the Board exempts the above transaction
from the prior approval requirements of 49 U.S.C. 11323-25, subject to
the employee protective conditions in Wisconsin Central Ltd.--
Acquisition Exemption--Lines of Union Pacific Railroad, 2 S.T.B. 218
(1997), and the condition below.
2. Watco must adhere to its representation that it will keep all
currently active GLC and AA gateways open on commercially competitive
terms commensurate with future traffic volumes and shipper demand and
subject to the cooperation of third-party interline partners in
facilitating traffic movements via such existing gateways.
3. Notice of this exemption will be published in the Federal
Register.
4. The exemption will become effective on September 28, 2025.
Petitions for stay must be filed by September 8, 2025. Petitions to
reopen must be filed by September 18, 2025.
Decided: August 29, 2025.
By the Board, Board Members Fuchs, Hedlund, and Schultz.
Brendetta Jones,
Clearance Clerk.
[FR Doc. 2025-16910 Filed 9-3-25; 8:45 am]
BILLING CODE 4915-01-P
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</html>Indexed from Federal Register on September 4, 2025.
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