UPDATE 1-FedEx Freight raises concerns over CP bid for Norfolk Southern

Thu Mar 3, 2016 2:06pm EST
 
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(Adds details of letter, context, background)

By Nick Carey

CHICAGO, March 3 (Reuters) - A unit of FedEx Corp has raised concerns over Canadian Pacific's bid for Norfolk Southern saying it could hurt rail service and lead to higher shipping costs, according to a letter posted by a U.S. federal rail regulator on Thursday.

In the letter to the Surface Transportation Board dated Feb. 25, a FedEx Freight executive wrote the company believes "a merger would lead to diminished service as well as higher shipping costs."

CP unveiled its $28 billion bid for Norfolk Southern last November but has been repeatedly rebuffed by the No. 4 U.S. railroad

The Canadian railroad has garnered support from more than 80 shippers for its bid.

But a number of industry groups and rail customers have come out against any deal.

FedEx's letter follows one from its main rival United Parcel Service Inc. In that letter, the world's largest package delivery company urged the regulator to deny any merger application.

UPS is also the largest single customer of the major U.S. railroads.

The remaining Class I U.S. railroads have also said that further consolidation would not benefit the industry or customers. Major mergers in the 1990s were accompanied by significant service disruptions.

The Surface Transportation Board would have to review any possible merger. If a deal is reached, it would be the first review by the regulator since it overhauled the merger rules in 2001 that added new hurdles for takeovers. (Reporting by Nick Carey, editing by G Crosse and David Gregorio)