CALGARY, Alberta — Canadian Pacific Kansas City said today that Class I railroad mergers are not necessary and that it isn’t interested in participating in an immediate round of consolidation.
“We believe that a transcontinental merger would trigger permanent restructuring of the industry and result in a disproportionately large railway whose size and scope would require others to take action,” CPKC CEO Keith Creel said in a statement that echoed his remarks on the railway’s earnings call last month. “This will likely result in an unnecessary wave of railway mergers that today is not the best way to support American businesses nor the public interest, and has the potential to create more issues than it solves.”
CPKC’s announcement comes a day after Berkshire Hathaway Chairman Warren Buffett told CNBC that Berkshire, which owns BNSF Railway, will not make a bid for CSX or Norfolk Southern as a competitive response to Union Pacific’s proposed $85 billion acquisition of NS.
Activist investor Ancora Holdings, which has a small stake in CSX, earlier this month urged CSX to engage in merger talks with BNSF and CPKC.
“CPKC does not believe that further rail consolidation is necessary for the industry as currently structured. The company remains focused on delivering more of the benefits and unique value-creating opportunities of its three-nation network, which connects shippers in all parts of North America via effective interline service options,” CPKC said.
Any major rail merger, CPKC says, poses “unprecedented risks to customers, rail employees, and the broader supply chain. Those risks would be exacerbated by the inevitable follow-on consolidation,” the railway says.
The industry should instead focus on interline partnerships, which can provide many of the same benefits of mergers but without the integration risk, CPKC says.
“CPKC continues to pursue these opportunities, such as its recently announced collaboration with CSX on the Southeast Mexico Express service linking the U.S. Southeast to Mexico,” the railway says.
BNSF and CSX last week announced new interline partnerships for domestic and international intermodal service.
Canadian National also has expressed support for additional interline partnerships rather than mergers.
UP and NS on July 29 revealed their plans to merge into the first U.S. transcontinental railroad. The deal, they say, will improve service, boost the American economy, and lead to volume growth. It will be the first Class I railroad combination judged under the Surface Transportation Board’s tougher 2001 merger review rules.
“UP and NS on July 29 revealed their plans to merge into the first U.S. transcontinental railroad. The deal, they say, will improve service, boost the American economy, and lead to volume growth.”
Service will decline as they cut back on switching frequencies, it will boost the amount of capital to buy back stock for the hedge funds, the volume will have a bump initially, but will gradually decline again as the cost cutting and chasing away of customers begins to take hold.
Who is zoomin who here?