Major stake in CSX sold
By Andrew Gomes
Advertiser Staff Writer
Transportation conglomerate CSX Corp. has agreed to sell a majority stake in its domestic shipping unit CSX Lines LLC, including operations in Hawai'i, to a Washington, D.C.-based investment firm for at least $300 million.
Bruce Asato • The Honolulu Advertiser
The deal, announced yesterday and expected to close by March, would convey 80 percent ownership of one of the Islands' largest shipping lines to The Carlyle Group. CSX would retain 20 percent.
CSX yard manager Dwayne Fujitani oversees movement of containers at Sand Island. CSX Corp. has agreed to sell controlling interest in its domestic CSX Lines.
Carlyle agreed to pay $240 million in cash and $60 million in cash and securities. The price could rise if undisclosed financial targets are met, CSX said.
If completed as expected, the sale would transfer control of the nation's largest ocean transportation company and allow CSX to focus on its core rail business in the eastern United States.
No changes are expected to CSX Lines' operations in Hawai'i, where the company is the second-largest ocean transportation business, with 55 employees, container terminal operations and two ship arrivals a week with service between the West Coast and Honolulu; Kahului, Maui; Nawiliwili, Kaua'i; and Kawaihae and Hilo on the Big Island.
"There will be no impact to the service to the state ... none at all," said Marv Buchanan, director of marketing and pricing for CSX Lines in Hawai'i, Guam and Alaska. "We're going to have the same ships, the same people and the same organization."
CSX Lines, based in Charlotte, N.C., has about 1,600 employees and operates 17 vessels providing container service between ports on the Mainland and Alaska, Guam, Hawai'i and Puerto Rico.
Charles Raymond, CSX Lines president and chief executive officer, will retain his position along with his existing management team, according to the Carlyle Group. Raymond will become chairman of the company, to be renamed Horizon Lines LLC upon completion of the sale.
CSX, a publicly traded firm based in Richmond, Va., operates a rail network covering the eastern half of the United States. It also owns CSX World Terminals, which is invested in and manages container terminals in Asia, Europe and Latin America.
Three years ago, CSX sold the international arm of its ocean transportation business, Sea-Land Service, to Maersk, leaving the domestic side for anticipated sale.
CSX Lines represented 6 percent to 8 percent of CSX business last year, accounted for $681 million of $8.1 billion in operating revenues and $17 million of $293 million in net profits.
Carlyle Group believes it can improve profits, though it did not disclose its specific plans.
"CSX Lines is a well-managed company that has a bright future," said Greg Ledford, Carlyle Group's managing director, in a statement. "We look forward to working with Chuck Raymond and his seasoned team in the coming years to further unlock CSX Lines' great potential."
Ledford said CSX Lines added to his firm's growing transportation portfolio. Carlyle Group manages more than $13.9 billion in investments made in buyouts of companies in real estate, industry and other ventures.
The investment firm is buying CSX Lines with a combination of equity from a Carlyle Group buyout fund plus financing provided by ABN AMRO Bank.
Credit Suisse First Boston Corp. and Wachtell Lipton Rosen & Katz advised CSX on the sale.
The transaction is subject to regulatory approvals, including those from the Department of Justice and the federal Transportation Department's Maritime Administration.
