Union Pacific is working with Morgan Stanley investment bankers to provide guidance on the potential acquisition of another Class I railroad, the online publication Semafor reported on Wednesday, citing people familiar with the matter.
UP and Morgan Stanley declined to comment to the media outlet. CSX and Norfolk Southern stock prices surged on the news, while UP’s declined.
UP CEO Jim Vena has touted the potential benefits of a transcontinental merger while acknowledging the regulatory obstacles to any deal.
The Surface Transportation Board adopted more rigorous merger review rules in 2001 after rapid consolidation in the industry during the 1990s, including the Burlington Northern-Santa Fe and Union Pacific-Southern Pacific mergers as well as the CSX-Norfolk Southern deal to carve up Conrail.
The 2001 review rules — which require a merger to enhance competition and be in the public interest — remain untested. The 2023 merger of Canadian Pacific and Kansas City Southern was judged under the old merger rules thanks to an exemption that was granted to KCS, the smallest Class I, in the 2001 rules.
The STB is currently split along party lines, with two Republicans and two Democrats on the board. Analysts don’t expect a third Republican member to be nominated and confirmed before next year. And if two Class I railroads were to propose a merger, analysts say any deal would not be hatched until after a third Republican is seated on the board.
Y’all will recall that we had a lot of fun with CP + KCS speculating on a merged corporate name. Here’s mine for the current prospect – “Union Pacific.” This is based on previous mergers with UP.
Rail North America for BNSF + CNR +CSX. (Not that I want it to happen.)
According to Warren Buffet’s Berkshire Hathaway, they have no interest in a Merger. They have enough trouble kowtowing to JB Hunt’s every whim…
Nothing wrong with talking about it.
But as I noted before, I don’t think they realize what the STB will want in return. They better be prepared to give up a lot, to get a lot.
Morgan Stanley will be focused on cutting yet more costs to generate more revenue. Not providing better service as part of it.
Why don’t we put this to a vote.
Forum members who support exploring transcon mergers vote “aye”.
Forum members who want to end the discussion here and now vote “nay”.
Aye. Why not? Should make for an interesting, extensive discussion. BTW, as of this moment, the market seems to be betting on NS, based on stock rise vs. CSX.
Nay…This coming from a UP man. The only thing a merger does for any combination is make the financial sector rich while everything continues to go to hell in a hand basket. I say more alliances like the UP/CN/ Ferromex Falcon Service but as I have said before:
“Mergers…we don’t need no stinking mergers…”
Nay. The benefits of mergers accrue to the suits and shareholders alone. The other stakeholders, the shippers, rail workers, and taxpayers gain nothing. The supposed efficiencies of consolidation are unlikely to benefit us all.
Nay ….. If the railroads were interested in serving the customers, they would have done it by now.
Maybe it’s a leap of judgment, but my gut feeling (FWIW) is that the merger talk of the last two weeks or so has come about because of a frustration with the status quo. Not that the mergers would solve anything, but no one else has come up with any answers.
The talk of the double-short haul, railroads not wanting to take a load from a bit west of the demarcation line (Chicago, KCMO) to a bit east of there, is hooey. If two railroads can’t cooperate to move freight from, say, Iowa to Indiana (the double short-haul) then a merger won’t change that.