Eastern Railroad Discussion > BNSF + CSX ? Another perspective

Barron's has an article today looking at the chances of a BNSF merger / purchase of CSX.  The author is Andrew Bary, an extremely well connected veteran writer who has covered Berkshire for decades.

He sees the chances of a BNSF offer rising in recent days for several reasons. One is the scarcity issue. Nobody can assemble a franchise like CSX or NS again. Observers believe BNSF would want both mergers considered at the same. If BNSF doesn't move now, UP gets a significant first mover advantage in what may be a drawn out regulatory process. 

Even at 25x earnings, CSX would be accretive (add to) Berkshire's and BNSF's earnings in 2026. Mr Buffett is deeply susicious of deals which don't add value right away.

He has the money to write a check, unlike UP which will almost certainly have to issue more stock and debt to finance their deal. with NS Although some of the funding is in regulated insurance accounts, nearly $100 million is in liquid, unrestricted funds.

Last, at age 94, Mr Buffett has said he would like one last "elephant size" purchase. This could be it.

But, he doesn't like to chase deals, he doesn't like to operate out in the open, and he doesn't like bankers. Although Berkshire has said that neither Mr Buffett nor his #2 Greg Abel have spokem to bankers, the wording allows that BNSF officers may have spoken with bankers. 

MY OPINION:  BNSF will make an offer to purchase several lines from NS and UP  which will drop into a joint company with CSX.  But that won't happen until NS + UP show their cards with the merger proposal and spin offs.

Good analysis. IMO, if this goes through, there will definitely be concessions and horse trading, at the minimum to satisfy the STB and customers. This is bigger than the Conrail split up and will have serious ramifications on the United States railroad system. Conrail did some things that were ruthless to connecting railroads and shortlines.

Victor Baird



Edited 3 time(s). Last edit at 07/25/25 09:48 by wabash2800.

Lackawanna484 Wrote:
-------------------------------------------------------
>
> MY OPINION:  BNSF will make an offer to purchase
> several lines from NS and UP  which will drop
> into a joint company with CSX.  But that won't
> happen until NS + UP show their cards with the
> merger proposal and spin offs.

I mostly concur although CN is slated to be the big winner with a NS-UP in line divestment/trackage rights. Mexico access is a good example as a CSX-BNSF already has connection points to Mexico and obviously CPKC enters Mexico which only leaves CN. I'll be shocked if trackage rights and/or line divestment over portions of the ex-Cotton Belt and ex-SP routes from Memphis to Eagle Pass and Houston aren't gifted to CN. Makes way too much sense. I'll also fully expect CN to gain trackage rights on ex-Wabash between KC and Springfield. Further, the ex-Wabash between St. Louis and Decatur becomes redundant and less relevant given C&EI between St. Louis and Sidney/Chicago IL...plus ex-GMO/SPCSL between Springfield/St. Louis and Chicago. Given that reality, easily can see Decatur to St Louis divested to CN with trackage rights the rest of the way from Decatur to Gibson City via Bement IL.



Edited 2 time(s). Last edit at 07/25/25 11:35 by AaronJ.

It is my hope that CPKC will take this opportunity to sell all their Mississippi Branchlines, the Greenville Sub between Blanchard (Shreveport), Louisiana and Wylie, Texas, and their 70% ownership of the Meridian and Vicksburg Subdivisions, a.k.a., The Meridian Speedway LLC.

I never expected KCS to be superior to anyone, but KCS operated these lines much better than CPKC is operating them.  

So, CPKC, if you're listening, sell the above mentioned lines, pocket the money and concentrate your efforts on your north-south corridor.  That's all you're interested in anyway.

VR Out



 

Good thread.

Mr Buffett has the cash to do a cash deal for NS or CSX, free and clear. Mr Vena is offering mostly stock for NS, I believe.

Posted from Android

In my opinion the #1 thing BNSF will ask UP for is direct access to Laredo from their current trackage rights in San Antonio. #2 would be to buy a St Louis to KC line.

I also believe CPKC will ask for trackage rights for:
Texarkana to Laredo.
Meridian to Atlanta to Savannah.
Eastport to Portland.
 

I have to wonder:

Are these final megamergers actually realistic, or are the investment banks (and the billionaires who control them) just trying to string the Class 1s along and steal as much in "consulting fees" as they can until the STB says sends them packing?

Just got to thinking:  Should UP get NS, and BNSF gets CSX, you might as well kiss the old Conrail Big Four goodbye, at least as a through main line.  In Conrail days, the CR St. Louis Line hosted a lot of traffic, especially Texas chemical business, through the UP (former MP, nee C&EI) connection at St. Elmo, Illinois, and it didn't hurt that the Marion Branch from Anderson to Goshen, Indiana, also saw two freights each way a day linking Indy's Avon Yard with Elkhart.  With the CR split, however, NS got the east end of Conrail through Pennsylvania and other Mid Atlantic States, so much of the carload traffic that ran over those lines was moved over in the Midwest from the Big Four to NS' former Wabash, including UP business that was routed through a new connection with the former C&EI at Sidney, Illinois.  NS also got the Marion Branch but otherwise desired little presence in Indianapolis.  (CSX sidings reach most of the Indy customers.  NS gave up its former NKP branch into Indy in 1989 and hasn't used its CSX trackage rights into Indy for several years, instead having CSX move the few NS cars per week between South Anderson Yard and Avon.)  

Then Hunter Harrison and PSR happened.  Today CSX runs scarcely more than a dozen trains a day over the "Bee Line" between Indianapolis and Sidney, Ohio, although traffic picks up east of Sidney, thanks to connections from other CSX Ohio-based main lines and auto traffic, particularly with Honda at Marysville, Ohio.  Secondary routes feeding into Avon Yard help to add a few trains between Indy and Terre Haute which connect to the CE&D Sub for movements to the Southeastern U.S.  West of Terre Haute, however, the CSX St. Louis Line Sub (ex-Conrail, not the former B&O) is often pretty quiet.  The daily PRB coal trains between East St. Louis and Lis, Illinois, that CSX used to share with INRD moved over to a joint BNSF / CN routing several years ago.  Most of the leftover UP business that CSX retained after the Conrail split doesn't even move through the St. Elmo interchange anymore but instead takes the longer route through East St. Louis.  

Most CSX and NS intermodal traffic continues to move via Chicago.  CSX is down to two pairs of I-trains moving through Central Indiana:  one each way between East St. Louis and Syracuse and another each way between Detroit and Mexico.  Other short intermodal cuts are added to regular carload trains as needed.  Similarly, NS piles all of its stacks onto a single pair of trains, an intermodal land barge if you will, between Kansas City and Harrisburg.  

Many of us had always felt that a UP-CSX combination would be the salvation for the Big Four between Illinois and Cleveland.  If UP and NS become a reality, however, that leaves the CSX St. Louis Line with nowhere to go, even after a merger with BNSF.  To my knowledge, BNSF isn't particularly busy in the St. Louis area.  In addition, while CSX and BNSF beefed up their interchange track at Smithboro, Illinois (crossing of the Big Four with the ex-CB&Q secondary line to Southern Illinois), several years ago, nothing much in the way of traffic has ever come from it.

While we're at it, here's another bit of speculation:  Could one of these combinations spark a revival of the former B&O across Southern Illinois and Indiana?

Your thoughts... 

Jeff Gast
Greenwood, Indiana
       

I wonder about a lot of interchange points like KC, STL, Chicago. BNSF moves a lot to NS in Chicago. Off the top of my head, an incomplete daily list would be a manifest, 1-2 coal, 1-2 oil/ethanol, some grain, and a bunch of intermodals. Then there is certainly trainloads of vehicle, manifest, and intermodal traffic that goes through the yards daily.

If all of that is UP, why interchange it to UP? They might rather do what they can to route onto CSX for the long eastern haul, and push interchange as far east as possible if the end destination is on UP(NS). That actually could make service worse, adding more circuity and handoffs.

I could see certain "forever" interchange points dramatically changing, because they depend on there being no transcon railroad. Take Canal St. in Chicago - it's 6-8 freights a day, but it could be zero if that traffic is pivoted to CSX.

inrdjlg Wrote:
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> Just got to thinking:  Should UP get NS, and BNSF
> gets CSX, you might as well kiss the old Conrail
> Big Four goodbye, at least as a through main
> line. 

I have to agree with this, as I think some folks here on TO are focusing too much on less important line segments (or their favorite) in a regional viewpoint. We all know the last round of railroad mergers is about coast-to-coast, or longer haul service, than is currently offered. And less interchange, or least that's how it will be sold to regulators and customers. And let's face, St. Louis just doesn't factor into this, and basically never has. It would be less so in a transcontinental merger. Think about it: What west coast traffic, from any origin or of any type (esp. intermodal), needs to go through St. Louis? Probably none, or less than we think. And lots of regional traffic from west of St. Louis could be re-routed to more direct or quicker routes. Even some Texas traffic could migrate to the east through other places like Memphis or New Orleans, depending how the chips fall. However, St. Louis is clearly out of the way for the long haul lanes, and would likely see a diminished importance, which could also be true of other places. Think asset reduction and line rationalization, a hallmark of previous mergers, even if it means crappier service or a more circuitous routing to lop off unneeded lines. Of course, this is all just speculation like everyone else is offering, but to think that anything not part of a potential long haul or coast-to-coast lane would be better off than worse in a merger is highly unlikely. Your mileage may vary...

JG



Edited 1 time(s). Last edit at 07/25/25 18:52 by jgilmore.

Lackawanna484 Wrote:
-------------------------------------------------------
> Good thread.
>
> Mr Buffett has the cash to do a cash deal for NS
> or CSX, free and clear. Mr Vena is offering mostly
> stock for NS, I believe.
>
> Posted from Android

Of course, all this BNSF-CSX (or BNSF and whomever) talk is assuming that Berkshire Hathaway would feel like buying another railroad is the best use of its money....  BH could decide that this might be a good time to spinoff the BNSF to the markets or another owner. 

Ticeska Wrote:
-------------------------------------------------------
> Lackawanna484 Wrote:
> --------------------------------------------------
> -----
> > Good thread.
> >
> > Mr Buffett has the cash to do a cash deal for
> NS
> > or CSX, free and clear. Mr Vena is offering
> mostly
> > stock for NS, I believe.
> >
> > Posted from Android
>
> Of course, all this BNSF-CSX (or BNSF and
> whomever) talk is assuming that Berkshire Hathaway
> would feel like buying another railroad is the
> best use of its money....  BH could decide that
> this might be a good time to spinoff the BNSF to
> the markets or another owner. 

He has been known to say he might spin off BNSF is merger winds blew....but if he finds keeping and merging to more "accretive" to income he might just do that... 

Mr Buffett has said he wants to do one more "elephant" deal before he moves on.

CSX might be that. Or something different like GE Aerospace.

Posted from Android

The big winners seem to be the companies selling U.S. railroad maps and crayons.

There's a whole lot of forward thinking wondering about the future of the Panama Canal. If the
canal continues to have water issues that would make a seamless transcon truly golden. I can
see a lot of said future thinking as well relative to traffic growth say ten years from now on
specific routes.

Out 

inrdjlg Wrote:
-------------------------------------------------------
> Four between Illinois and Cleveland.  If UP and
> NS become a reality, however, that leaves the CSX
> St. Louis Line with nowhere to go, even after a
> merger with BNSF.  To my knowledge, BNSF isn't
> particularly busy in the St. Louis area.  In

LA-Barstow-Amarillo-Avard-Tulsa-St. Louis feeds right into the Big Four.  So does Houston-Tulsa-St. Louis.  Tulsa is a huge hump yard and major sorting point for these traffic lanes.

Western Roads hand off business in Chicago when possible to maximize their revenue split.  There wouldn't be any point to such behavior in the trascontinental future.  Traffic will mvoe via the shortest possible route, which for Texas and California traffic to CSX will be the Big Four.  it would be stupid and criminal to continue sending such cars to Chicago.

jgilmore Wrote:
-------------------------------------------------------
> transcontinental merger. Think about it: What west
> coast traffic, from any origin or of any type
> (esp. intermodal), needs to go through St. Louis?
> Probably none, or less than we think. And lots of
> regional traffic from west of St. Louis could be
> re-routed to more direct or quicker routes. Even
> some Texas traffic could migrate to the east
> through other places like Memphis or New Orleans,
> depending how the chips fall. However, St. Louis
> is clearly out of the way for the long haul lanes,

The straightest and fastest route from Texas to the northeast and Ohio is via St. Louis.  None of the single track routes through the South to Memphis and New Orleans offer speed.  And if you draw a straightline from Albuquerque or Tulsa to Greenwich, Ohio, it pretty much passes through St. Louis.  Why would you run things any other way if you were BNSF-CSX?

abyler Wrote:
-------------------------------------------------------
> Western Roads hand off business in Chicago when
> possible to maximize their revenue split.  There
> wouldn't be any point to such behavior in the
> trascontinental future.  Traffic will mvoe via
> the shortest possible route, which for Texas and
> California traffic to CSX will be the Big Four. 
> it would be stupid and criminal to continue
> sending such cars to Chicago.

Exactly! Great analysis.

Do you think Avon Yard would play a role? I can't remember whether it still is a hump.

Thank you, "abyler" and "ts1457", for - once again - calling out some important points..

First of all, the importance of one carrier controlling the rate and revenue for an entire east-west trip across the traditional divide in the middle of the country between western and eastern carriers. I mentioned some time ago when all of this merger discussion started that a key economic force is the fact that it takes away the need for any division of rate revenue between a western and eastern railroad. That had in the past driven the dominance of the Chicago gateway - it maximized line-haul mileage for both the western and eastern partner. At other gateways like St. Louis, Memphis or New Orleans, one partner or the other was forced to short-haul itself as compared to going all the way to Chicago.

With a merger, that situation goes away. The merged railroad gets all of the revenue for the east-west line haul. And that in turn allow the newly merged railroad to use the other gateways more freely. There is no longer any concern about short-hauling itself by taking a shorter, less congested route. The traffic can take the route that is the most efficient. And can more easily avoid Chicago. Those previous comments were largely ignored. I was surprised. Because this gets down to the fundamental economics that will drive any big east-west merger.

But maybe it was because everyone was focused on routes - and not on costs and revenues. And perhaps because they did not have any background in rates, and did not understand the extent to which carriers historically would go to avoid short-hauling themselves. That has been a reality in railroad rate- route traffic analysis for a long time. Getting the crayons out and connecting lines on the map as "Englewood" so sharply suggested (zing!) - a purely route focus - has been more common.

There are of course needs for looking at the lines on the map. That's the mechanics of doing it all - the routes. And as was noted, the St. Louis gateway sits right in the middle to be able to perform that function. As "abyler" correctly notes, neither New Orleans, Memphis (or Vicksburg) has the feeder capacity from the west that St. Louis does. And I would further note, as I have before, that St. Louis sits in a central geographic position to capture traffic to the southwest and funnel it northeastward, directly east, or - importantly - to and from the growing and traffic-rich Southeast. Chicago inherently skews things by 300 miles to the north. Just to keep from short-hauling.

It's not perfect. The BNSF's former Frisco from Tulsa is hilly and curvy across the Ozarks (although reasonably fast - it's not a Tehachapi), and is single-track CTC. CSX + BNSF would have to lean on that route a lot. It would have no other direct route into St. Louis from the west. UP + ?? has the superior route in from the west via the former MP from Kansas City - 2 main tracks the entire way, full CTC. Plus the former Wabash if the combination is UP + NS (and if the Wabash and CPKC ex-GM&O / Alton routes are not somehow divided or given some compensatory access).

At St. Louis, BNSF would have to operate over more of the TRRA to reach the CSX former PRR or former B&O (assuming that line is reactivated - highly probable in my view). UP has more of a straight shot, and really only needs just the piece to cross the Mississippi on the now-TRRA-owned MacArthur Bridge. It owns all the rest of the route. But both both roads have long ago worked through the nuts and bolts of those situations, and traffic can move pretty smoothly through St. Louis.

Those are the operational realities, and they are important. But don't let them dominate your thinking - or your crayon work on your map. Whither it's St. Louis or other connection points between the western and eastern partner in the deal, a fundamental economic driver will be to eliminate the need for a rate division between the eastern and the western railroad, and thus to take away the long-standing carrier concern about short-hauling itself.

And that will also be a key point for shippers. They will now have but one carrier to negotiate with - for the entire east-west haul. Their ability in a rate negotiation to use the rate division between the eastern and western carrier as a lever in the negotiation will disappear. It will now be one carrier, one rate, no division of revenue - take it or leave it. And if you try to hand it off to the other guy at a gateway point or other location than the final switch (even if a reciprocal switch), we'll punish you on the rate. That's it, dude. Take it or leave it. Or somehow go to the one other carrier for a longer, more roundabout haul.

In other words, just about like it is buying an airline ticket for a long transcontinental or transoceanic flight. Pay up, sucker, for the non-stops and multiple schedules at good times of the day when you want to fly. Wanna go cheaper? You get a connection in an out-of-the-way city, no non-stops, an inconvenient schedule, a long layover in a hub city. 

Competition is great, ain't it? There is very little of it in railroading today. There will be even less if this merger goes through - even with various "competitive access" concessions ("AaronJ" is really fond of those, and keeps adding news ones to his list). But will the efficiency gains by routing of a merged railroad through less-used east-west gateways justify, or outweigh, the potentially higher rate when one carrier controls the whole main routing? I highly doubt it. The carriers will use the efficiency argument - which is entirely rational. But it's also the emperor's clothes. Take them off, and you've got the naked reality beneath - one carrier now controls the entire east-west route, rate and revenue. And will have the kind of pricing leverage that railroaders have dreamt of for generations - with no sharing of revenue with anyone else. Except maybe a few breadcrumbs thrown to a regional somewhere for an origination or destination segment. Whoopee.

Exactly the kind of dominant pricing power that shippers dread. Especially with a weak or captured regulator, and a very high bar for regulatory relief. As for the truckers, they will be delighted to step in and capture even more traffic. At higher rates, too - but less than the big railroad will now charge. Remember, money, like power, abhors a vacuum. And if a competitor gives you room to raise your price, most everyone will do it. Something like the old adage that a rising tide lifts all boats. Or all trucks.

That's why I'm opposed to it. The value-add really isn't there for the customer / shipper - and the consumer of that's shipper's goods (that's us), who ultimately pays the price. That is, if you put away the crayons and maps and do what you should always do in matters like this. Don't just go connecting lines on a map with your crayons. Follow The Money.

MC

abyler Wrote:
-------------------------------------------------------
> The straightest and fastest route from Texas to
> the northeast and Ohio is via St. Louis.

Yeah, only for UP-NS, and it doesn't even have to go THRU St. Louis in a merger. Again, as I mentioned, this is only regional traffic. Remember, too, that for years expedited traffic from UP to the northeast didn't bother with St. Louis but went to CR via St. Elmo or even to Chicago. UP could easily set up a new connection to NS lines in the same way. As for the subject of this thread, a BNSF-CSX hookup, they wouldn't have nearly the Texas to northeast traffic that UP does, and it would have to go straight north first and very likely not St. Louis. That lousy (for PSR trains) ex-Frisco trackage cannot negate going to KC and straight to Chicago to hook up with the ex-B&O. It's too obvious. And traffic doesn't flow in a straight line in the PSR era anyways, only what lines they want to keep...

> And if you
> draw a straightline from Albuquerque or Tulsa to
> Greenwich, Ohio, it pretty much passes through St.
> Louis.  Why would you run things any other way if
> you were BNSF-CSX?

What are you talking about, see above. Transcon to Chicago to the B&O, nothing important would be allowed to meander to St. Louis, which is clearly off the beaten path for coast-to-coast traffic like I said before. To think that this round of mergers is about regional hookups is dellusional. NOTHING from the west coast to the east coast needs to or would go through St. Louis, much like today. Not sure where this crazy fascination with St. Louis in this thread comes from, but there's nothing much to see there from a merger standpoint. Maybe some regional gains and losses, but nothing major. Time to move along...

JG



Edited 1 time(s). Last edit at 07/27/25 11:45 by jgilmore.