In 1984, Conrail, as part of their project of divesting low-performing trackage, put the Canada Southern up for sale. It attracted three bidders; the Canadian Pacific & Canadian National (who wanted the the Michigan Central Tunnel and Michigan Central Bridge, but only wanted the rest of the railway if they didn’t have any choice) and a local group of investors (who wanted the rest of the railway more than the tunnel & bridge.)
These three suitors agreed to do a joint bid, and then split up the railway into the bridge & tunnel (to the CPR & CNR), the terminal facilities in Windsor (to a new railway – the Windsor Terminal Railway – jointly owned by all three) and the mainline between Fort Erie & Windsor (to the local investors, who purchased CASO’s name, reporting marks, and Conrail’s CASO stock.)
The new CASO intended to be a alternate bridge route between Detroit and Buffalo, and made agreements with the Delaware & Hudson and Illinois & Michigan railways to do joint freights (a'la the old Alphabet Route.) This turned out to be successful, and in five years the railway was making good money as an alternative to the class 1s surrounding it.
In 1997, the CASO entered into merger talks with the Guelph & Goderich Railway and the Brantford-based Ontario Radial Railway Company to form the Ontario Southwestern Railway.
The CASO’s corporate shell still exists, as reporting marks and a mail slot in OSW’s Guelph HQ. Most of the CASO’s rolling stock has been repainted into OSW (or OSW parent LT&L) colours, but two ex-CASO RS-18s are still in jade green almost 30 years after the merger.