Canadian Pacific Rail Pursuing Merger with CSX, Reports Say

Don MacKinnon/Bloomberg News

Canadian Pacific Railway Ltd. is pursuing a merger with third-largest U.S. railroad CSX Corp., multiple news services reported, that would be the first such combination of major railroads in 15 years.

The Wall Street Journal first reported the bid by Canadian Pacific, Canada’s second-largest railroad, which is led by CEO Hunter Harrison. At 2014 investor events, Harrison has predicted that there would be more rail consolidation, without saying when that could happen.

The last rail merger plan was advanced in 1999, when Burlington Northern Santa Fe and Canadian National Railway proposed a combination. Harrison was chief operating officer of Canadian National at that time. The railroads’ plan was withdrawn after the U.S. Surface Transportation Board signaled that the plan wouldn’t be allowed to go forward amid opposition from competitors.

Officials at CP and CSX declined to comment to news services about a potential combination.

From a truck/rail standpoint, the companies’ combined shipment volumes and revenue still would position them behind BNSF, the largest intermodal operator.

Based on market capitalization, CSX and CP represent $62 billion in value. That is more than double what Warren Buffett’s Berkshire Hathaway paid for BNSF four years ago.

Based on revenue and operations, CP and CSX together total about $17 billion annually and about $5 billion in profit before interest and taxes. Both of those amounts are less than the annual revenue results of Union Pacific and BNSF.

Press reports didn’t indicate financial terms for a merger.


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