A merger would create a transcontinental carrier worth more than $60 billion. But it may have a tough time getting approval. Fred Katayama reports.
Canadian Pacific wants to hook up with CSX to create a $60 billion company, but the Wall Street Journal says the big American railroad operator rejected the merger offer. Were they to combine, the newly formed transcontinental carrier could capitalize on the energy boom, transporting crude from Alberta and the Great Plains to the Northeast. There's little overlap in their networks, but analysts say they may have a tough time getting approval. Regulators are not likely to bless any deal that's hostile. And CP is a foreign company trying to buy U.S. infrastructure. Canadian National Railway dropped its bid for Burlington Northern after regulators cited competition concerns. That was 14 years ago, and that was the last time two tier one railways tried to merge. CP CEO Hunter Harrison, who was handpicked by activist investor Bill Ackman, led CN at the time. News of the talks drove CSX sharply higher. Other railroad stocks also rallied, especially Norfolk Southern. Stifel Nicolaus believes a merger would set in train more consolidation. Analyst John Larkin said, "CSX's eastern competitor, Norfolk Southern, may feel compelled to merge with another carrier as well in order to remain on a level playing field."