Canadian Pacific Railway and CSX Call Off Merger Talks.
Merger talks between the Canadian Pacific Railway and the CSX Corporation have ended, stifling an effort to create a $60 billion giant during a boom time for the railroad industry.
Canadian Pacific confirmed the end of “exploratory” deal discussions in a statement on Monday, adding that no further negotiations were planned.
No reason was given, though the company hinted that concerns about objections from regulators might have played a role. CSX had been largely cool to the idea of a merger, people briefed on the matter have said.
Yet Canadian Pacific, which had initiated the merger discussions, appeared unswayed in its belief that further consolidation would help the industry. Rail traffic has jumped as oil production has surged, leading to delays in the movement of other goods, as well as passenger traffic.
“The North American rail industry is confronted today with the challenges of moving more freight than ever and the prospect of moving even more as oil production, crop yields and consumer demand grow alongside the economy,” the company said in its statement. “CP is convinced that the significant problems that beset the industry now will only worsen over time if solutions aren’t put in place immediately.”
A merger would have been yet the latest bold move by Canadian Pacific as it seeks to become a powerhouse in the industry. Its current turnaround effort began two years ago, when the activist hedge fund manager William A. Ackman successfully pushed the company to hire Hunter Harrison, a longtime railroad executive, and undertake a campaign to cut costs and improve efficiency.
Combining with CSX would have created a sprawling railroad network with relatively little overlap: Canadian Pacific’s network runs primarily across Canada and into the United States, while CSX’s lines stretch largely along the East Coast.
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'Little overlap' suggests little viable objection 'from regulators,' but size suggests objections from competitors. Check Berkshire Hathaway (owns BNSF) and UNP (Union Pacific) stocks reaction to this announcement.
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