As merger talks broke off, CSX and Canadian Pacific officials are mum on exact details on the halt. CSX’s decision to decline a merger proposed by Canadian Pacific railroad, stirred investor attention leading to CSX’s stock dipping approximately 3.4 percent, to $32.70 in the early morning trading, as merger information was assimilated by investors.
Both behemoths have refused to comment further on the reports. CSX owns over 21,000 miles of rail in 23 Eastern states and two Canadian provinces. The freight railroad giant is the first U.S. industry member to report third quarter results. CSX railroad’s CEO, Michael Ward, explained that regulators could be hesitant with regards to the consolidation of large participants. He added, they continue to be focused on service.
Mr. Ward explained due to their only being six Class I railroads in the U.S. and Canada careful consideration would be applied to a merger deal by the Surface Transportation Board in likelihood. All mergers involving U.S. railroads have to be approved by the U.S. Surface Transportation Board. Consolidations occasionally experience opposition by shippers and rail labor.
Over the past two decades, Union Pacific gained approval to acquire the former Western Pacific, the Missouri Pacific, the Chicago & North Western, and the Southern Pacific. Another rail merger rejected by the U.S. STB was the 1984 proposed merger of the Santa Fe with the Southern Pacific. The last major merger in the industry involving BNSF and Canadian National, the transaction derailed after regulators enforced a 15-month moratorium and other limits upon rail mergers. Rail mergers have been devastating to rail employment. As Class I railroads decreased from 39 in 1980 to 6 today due to consolidations, the number of Class I railroad employees has declined by over 40 percent. CSX and Canadian Pacific end their talks of merger but some industry insiders say the halt just may be temporary.
BNSF is the combination of Burlington Northern and the Atchison, Topeka & Santa Fe companies. In the past two decades, Union Pacific was approved to acquire the former Western Pacific, the Missouri Pacific, the Chicago & North Western, and the Southern Pacific. The CSX and Canadian Pacific talks may resume but for now the companies are not discussing the matter publicly. In a statement Monday, CP said that while the regulatory concerns look to be a deterrent for railroads considering mergers, CP has the idea that with the correct structuring between the right two players, and having thoroughly considering shippers needs and concerns, regulatory approvals can be achieved.
Delays in railroad shipments, of especially grain within the northern Great Plains, are in the last year due to extremely cold weather and the high demand for oil shipping, as well as an exceptional harvest. CSX stays dedicated to bettering its procedures along with providing strong results for its investors, paraphrasing Ward. The merger with CSX would have created a railroad network with very little overlap. Canadian Pacific’s rails run primarily across Canada and into the United States, while CSX’s lines are mostly along the East Coast.
The Florida-based firm claimed Tuesday its third quarter earnings increased 12 percent to $509 million, or 51 cents per share. This is up from $455 million, or 45 cent per share, from a year ago. As merger talks halted between CSX and Canadian Pacific neither company has much further to say publicly on the matter. CSX representatives informed investors they are confident in the railroad’s prospects, and they anticipate double-digit expanse in earnings per share in the coming year.
By Oliver L. Malcom
Photo By Denise Rosser Flicker License
Photo By Michael Coghlan Flicker License