Hunt Interested in A&M

Less than a week after Arkansas & Missouri Railroad Co.’s May 10 stockholder meeting, the company’s future turned volatile.

Company officials said A&M Chairman of the Board J. Anthony Hannold of Virginia owns 64 percent of A&M’s total stock and plans to sell it for about $14 million. The total value of the company is estimated to top $20.8 million.

Although Hannold is negotiating with a Chicago investor, J.B. Hunt, the local trucking mogul who built J.B. Hunt Transport Services Inc. in Lowell, and partner Tim Graham, a Northwest Arkansas real estate developer, have hinted their interest in buying the shortline.

The stock sale comes 14 months after A&M in Springdale gained its independence from Burlington Northern Santa Fe Corp. of Fort Worth, Texas. A&M now owns and operates 139 miles of track from Monet, Mo., to Fort Smith.

Veteran railroad executive Reilly McCarren of Chicago is the the likely buyer, a fact that prompted A&M President Larry Bouchet to take a 30-day paid leave from his office.

Bouchet said his business philosophy clashes with Hannold and McCarren’s convictions, right down to the bottom line.

“I don’t feel that the long-term goals for the railroad are something I want to be a part of,” Bouchet said. “It won’t be a family anymore. I can’t live like that.”

Graham said there have been no formal negotiations among Hunt, himself and Hannold. However, he said, maintaining local control of the railroad is important for the business community.

“We know more about what Northwest Arkansas needs than some guy from Chicago,” Graham said.

Neither Hunt nor Graham now work for J.B. Hunt Transport, but Hunt’s experience with intermodal transportation is extensive.

Mark Bonnell, A&M vice president of marketing and systems administrator, said the company will comment on any transaction when it happens.

“Nothing has been signed by anybody,” he said.

A&M is a healthy short-line railroad, and administrators expect to upgrade the company to a class-two line in 3-5 years. Class-two companies generate operating revenue of $25 million-$35 million. A&M currently falls into class three with operating revenue of less than $25 million.

Poultry, sand, paper, lumber and plastic are the commodities most often carried by local rail.

Global vs. Local

Bouchet is opposed to turning the company over to McCarren, whose résumé is strewn with mergers. McCarren most recently served as president and CEO of Wisconsin Central Transportation Corp.’s North American interests. There, he was responsible for about 2,800 route miles, 2,300 employees and 13,600 railcars.

In October, Canadian National Railway Co. acquired Wisconsin Central, and the deal dismissed nearly all of Wisconsin Central’s executives, including McCarren. Before that, McCarren was president of Gateway Western Railroad, which sold to Kansas City Southern Industries in 1996.

McCarren graduated from the Massachusetts Institute of Technology in 1978 with a master’s degree in civil engineering.

“I refuse to run a company where the only thing that matters is the bottom line,” Bouchet said. “[McCarren] might run the profits sky high, but I always did a balancing act between employees, customers and stockholders.”

This year, A&M’s annual railcar traffic is expected to top 50,000, up 25 percent from about 40,000 cars in 2001 and 67 percent from about 30,000 in 2000.

“I always said once I got into a position of power, I was going to run the company the way I wanted to,” Bouchet told the Northwest Arkansas Business Journal during interviews for a cover story published May 13.

Sometimes, Bouchet’s grassroots approach to employment hurt company profits. A&M uses a basic honor system for procedures such as clocking in and out, and Bouchet said a former employee once made off with about $80,000.

Although he volunteered for the temporary leave, Bouchet said he isn’t trying to lead a massive rebellion in the company.

“I’ve got a golden parachute, and [the other employees] don’t,” Bouchet said. “So I don’t want to sway them one way or the other.”

Part of his undisclosed settlement includes a stock buyout. He said he currently owns 5 percent of A&M, 5 percent of Allied Enterprises Inc. and about 30 percent of American Best Transportation.

Allied owns 800-900 railcars, directs a scrapping service and operates A&M’s main transloader, American Best.

But even if McCarren doesn’t purchase the line, Bouchet’s future with A&M is questionable. Graham said Bouchet likely will leave the railroad, even if he and Hunt buy A&M.

Bouchet, who suffers from a form of multiple sclerosis, said he hasn’t made up his mind about his future role with the railroad. His disability doesn’t hinder his managerial duties, and he is considering working with A&M as a consultant for special projects.

He also has considered opening his own logistics consultation firm.

If Hannold sells his stock to McCarren, Bouchet has said he will step down from his executive positions with A&M, Allied Enterprises of Springdale and American Best.

Bouchet said Northwest Arkansas would benefit from the sale if Hunt and Graham took over the short-line.

“Then, [the railroad] wouldn’t be sold every three or four years,” he said.

In the May 13 Business Journal article, Bouchet said A&M was not for sale. He said he was surprised when, just a week later, Hannold announced his intent to sell off his stock.

Several projects were in the works before Bouchet took leave, and their fates are undecided. They include the following:

• In 2-3 years, the company planned to upgrade a 40-mile stretch of track between Winslow and Fort Smith.

• Company executives wanted to build new lines to attract commercial customers to the rail. Negotiations were under way to lay track for two local, unnamed poultry companies.

• Bouchet met with Fayetteville administrators in late April to discuss the possibility of laying seven miles of track to connect the city’s industrial park with the main rail line. Manufacturers such as Hanna’s Candles and Superior Tire Co. would then load goods directly on the train.

• A&M officials also were considering entering an agreement with class-one Kansas City Southern to carry freight and passengers from Fort Smith to Poteau, Okla.