Omnitrax, an American short-line railway giant, is buying up shares in Edmonton-based short-line operator RaiLink Ltd.
The Denver-based company has over the last few weeks acquired 24.8 percent of the outstanding common shares of RaiLink traded on the Toronto Stock Exchange.
In response, RaiLink has adopted a shareholders rights plan, commonly called a “poison pill”, and hired outside consultants to provide advice on dealing with what may become a takeover bid.
“We just want to make sure that if there is an offer for the company, that all the shareholders can benefit from it and that all shareholders get the best offer possible,” said Gordon Clanachan, president and chief executive officer of RaiLink.
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Omnitrax has given no indication of its plans and has had no direct contact with RaiLink.
In a Feb. 19 press release, the company said it “has not yet decided whether it is desirable … to seek to acquire control of RaiLink or to seek to otherwise influence the management and policies of RaiLink.”
Omnitrax president Dwight Johnson could not be reached for further comment.
RaiLink’s shares, which were trading for $5.50 on Feb. 11, the day before Omnitrax announced its first purchase of shares, closed at $6.90 on Feb. 26.
The shares have been as high as $14.55 and as low as $4.55 in the last year, but have traded in the range of $5.50 to $6.50 over the last three or four months. Like many other small companies, RaiLink’s stock took a nosedive during the general downturn in the market last fall and has never fully recovered.
“I’m not surprised that somebody out there looked at us and saw our shares at a low price,” said Clanachan. “We’re the leader in the industry in Canada, so we’re very visible, and we’re public.”
RaiLink is the third largest rail company in Canada, owning 10 short lines covering more than 3,500 kilometres of track, including two grain lines in Alberta, the Central Western and Mackenzie Northern.
Omnitrax operates 13 short-line railroads in seven American states and three Canadian provinces, including the Hudson Bay Railway in Manitoba and the Carlton Trail Railway in north-central Saskatchewan. It also owns the port of Churchill.
Clanachan said while RaiLink wants its shippers to get the best possible service at the best price, its primary concern is for its shareholders.
The rights plan, which requires Omnitrax or anyone else to make a “permitted” bid to all shareholders, expires May 17.
