Rail mergers could be 'destructive' to shareholder value - CSX CEO

Wed Jan 13, 2016 1:03pm EST
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By Nick Carey

CHICAGO Jan 13 (Reuters) - No. 3 U.S. railroad CSX Corp does not see any compelling benefits stemming from mergers of major railroads in North America and fears regulatory burdens could be attached to the approval of deals that would add to the cost of doing business, the railroad's top executive said on Wednesday.

"The benefits seem somewhat unconvincing, I really think the Class I railroads have great opportunities to create shareholder value without mergers," chief executive Michael Ward told Reuters by phone when asked about Canadian Pacific's unsolicited bid for No. 4 U.S. railroad Norfolk Southern Corp . "I think mergers could actually be destructive of shareholder value."

Ward said that CSX has met with representatives of other major railroads in the presence of legal counsel. Those representatives include Matt Rose, chairman of BNSF, the No. 2 U.S. railroad which is owned by Warren Buffett's Berkshire Hathaway Inc.

No. 1 U.S. railroad Union Pacific Corp's chief executive Lance Fritz told Reuters on Wednesday he believes major railroad mergers are not in the interest of the rail industry or customers and is working behind the scenes to make sure none take place.

By law, major U.S. railroads may only discuss topics that affect the entire industry.

"We haven't had any new consensus come out of this," Ward said. "To be honest we've had one or two discussions, but we were all against mergers to begin with."

Canadian Pacific in mid-November disclosed its $28 billion offer to buy Norfolk Southern.

Norfolk Southern has rejected the Canadian railroad's advances, setting the stage for a possible proxy battle. Any deal would face a tough review from rail regulator the Surface Transportation Board, which would judge whether it was in the public interest.   Continued...