Stephens Capital Partners (SCP) had developed a relationship with a deeply experienced partner, Alex Yeros, in the short-line railroad operating space, which did not yield a transaction for many years. SCP patiently nurtured the relationship. Eventually Mr. Yeros approached SCP in 2018 with a unique opportunity in the industry: Pioneer Lines (“Pioneer”), which had 15 rail properties across the Midwest and Southern U.S.
At the time, Pioneer was a company in need of significant enhancements to its organizational and operational efficiencies, as well as protections from contingent liabilities. The partner subsequently made progress on these liability issues, and approached SCP with the opportunity to acquire Pioneer at a large discount to market value. The acquisition was consummated in 2019.
The partner sought out SCP for multiple reasons. These included the stature Stephens possessed in certain Southern states in which Pioneer had been operating, as well as for introductions to potential new customers on railroads.
After three years, executive leadership at Pioneer has moved the headquarters from Peoria, Illinois, to Denver, hired and created an industry-leading team, and greatly improved the facilities and operating practices. Financial results have reflected these improvements.
In addition, shareholders began considering liquidity alternatives, amid high valuation metrics for short-line railroads and due to the strength of the management team as a potential asset for a much larger rail platform.