January 13, 2016 / 3:31 PM / in 3 years

Union Pacific will do all in its power to stop rail mergers- CEO

LOMBARD, Ill., Jan 13 (Reuters) - No. 1 U.S. railroad Union Pacific Corp 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, the company’s top executive said on Wednesday.

“We don’t want Class I railroad mergers to happen,” chief executive Lance Fritz told Reuters when asked about Canadian Pacific’s unsolicited bid for U.S. railroad Norfolk Southern Corp. “We’ll do everything in our power to make them not happen.”

Fritz, who was in the Chicago suburb of Lombard to address a meeting of the Midwest Association of Rail Shippers, said Union Pacific has been talking to state and federal legislators across its network, its customers and regulators including the Surface Transportation Board about why mergers would be bad for business.

“I think we’re doing a fair job of helping them understand our perspective,” Fritz said. “I think (the chance of a merger happening is) slim because I want it to be slim and we’re working hard to make it slim.”

He said a merger would create problems in Chicago where all major U.S. railroads interconnect and stressed a flurry of mergers in the 1990s created huge service issues.

Union Pacific has also talked to other major railroads about the potential impact of a merger, though those conversations are limited by law.

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

Norfolk Southern has spurned the Canadian railroad’s interest, setting the scene for a potentially lengthy proxy battle. A number of customers and legislators have written to the Surface Transportation Board (STB) opposing the proposed merger.

That opposition could significantly harm Canadian Pacific’s case if a merger reaches the STB for a review. Customers are concerned a merger would lead to others among North America’s remaining railroads, resulting in an anti-competitive duopoly.

According to its own rules, the STB must consider the potential for other mergers.

The No. 2 U.S. railroad BNSF, owned by Warren Buffett’s Berkshire Hathaway Inc, has said publicly if the STB agrees to consider a Canadian Pacific and Norfolk Southern merger, increasing the potential for a union, it could in turn bid for Norfolk or No. 3 U.S. railroad CSX Corp.

Fritz said a merger would “increase the pressure enormously” on other railroads to consolidate, but declined to say what action Union Pacific would take.

“We’ll evaluate that should it occur and do the best thing for our shareholders,” he said. (Reporting By Nick Carey; Editing by Chizu Nomiyama)

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