Eastern Railroad Discussion > CSX-CN and NS-CP in bed together for a merger???

Hi. Not that I think they're is going to be any big mergers anytime soon, but I find it interesting that usually when talks of mergers come along it usually starts with the western roads merging with either the Canadian roads or the eastern roads. All this despite the fact that in the last few years NS and CP have been cozying up to each other and now CSX and CN are starting to do the same thing much more than anything seen further west. It appears to me that if/when any future mergers happen down the road, there is nothing saying that it can't start via a NS-CP and CSX-CN mergers. Am I way off on this one?

Aaron

It would be cool if this happens!!!

CP is doing everything it can to keep it's share price high so as to be unattractive to a hostile takeover.

Realistically, that's because CP holds no cards in the merger end-game.

I was thinking about along these same lines the other day. I have been seeing alot of CN run through power on CSX recently. But you are right that the closer two roads work together the more they seem to think of each other as merger partners.

CSX and CN both have a direct mainline from Chicago to New Orleans. Wouldn't that be a huge duplication of resources? The CN doesn't need a parallel route, as they only need to relay the former double track if necessary. CSX's route is upgradable, too, most easily by splitting dispatcher desks to a more managable size.

I still believe that the easiest merger will be the next merger, and that is BNSF-KCS. That would counterbalance some of UP's dominance in Texas and Mexico trade. Afer that I see BNSF+NS and then UP+CSX as a defensive merger, if anyone of their boards even deems future mergers necessary. Plenty of new business is still on the table without a merger.

Canada is still a foreign country. Mergers with CP and CN will need to wait until domestic mergers are done, and truthfully, they can do plenty by swapping trackage rights and haulage, just as they are doing now.

fmw Wrote:
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> CSX and CN both have a direct mainline from
> Chicago to New Orleans. Wouldn't that be a huge
> duplication of resources? The CN doesn't need a
> parallel route, as they only need to relay the
> former double track if necessary. CSX's route is
> upgradable, too, most easily by splitting
> dispatcher desks to a more managable size.
>
> I still believe that the easiest merger will be
> the next merger, and that is BNSF-KCS. That would
> counterbalance some of UP's dominance in Texas and
> Mexico trade. Afer that I see BNSF+NS and then
> UP+CSX as a defensive merger, if anyone of their
> boards even deems future mergers necessary. Plenty
> of new business is still on the table without a
> merger.
>
> Canada is still a foreign country. Mergers with CP
> and CN will need to wait until domestic mergers
> are done, and truthfully, they can do plenty by
> swapping trackage rights and haulage, just as they
> are doing now.


UP+CSX will not be a happy combo, after UP's issues after Espee, and CSX after the Conrail split. You can bet if this goes ahead it won't be a happy pairing.

Maybe CPR and CSX will get NS and CN interested in AC traction at last!

fmw Wrote:
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> CSX and CN both have a direct mainline from
> Chicago to New Orleans. Wouldn't that be a huge
> duplication of resources? The CN doesn't need a
> parallel route, as they only need to relay the
> former double track if necessary.

With all due respect, I don't think the railroads see the CSX through Nashville and Birmingham as being any more of a "Chicago-New Orleans" route than the NS through Cincinnati, so this point is likely a complete non-factor. There is really only two roads that can truly tout a "Chicago-New Orleans" route and that is CN and UP. In addition, if you were to go by your logic, then the BNSF should never merge with the KCS since they have duplication in routes from KC to Houston, the UP should never merge with the CSX since they'd have duplicate routes across southern IL, the BNSF and NS should never merge since they've got duplicate routes between KC and Chicago, and on and on and on.

> I still believe that the easiest merger will be
> the next merger, and that is BNSF-KCS. That would
> counterbalance some of UP's dominance in Texas and
> Mexico trade.

I wouldn't count out NS and KCS merging before BNSF as they've already gone into a joint ownership agreement with the Meridian line. Otherwise, I'd agree with the reminder that UP+Ferromex/Ferrosur would quickly follow after any BNSF-KCS merger.

> Afer that I see BNSF+NS and then
> UP+CSX as a defensive merger, if anyone of their
> boards even deems future mergers necessary. Plenty
> of new business is still on the table without a
> merger.

This I don't see as being very likely until the very...very end of mergers and even then it may not happen as there is simply little to no shipper support now and into the foreseeable future for an east-west merger. The US class 1's will have a much easier go of it to merge with a Canadian road than a east-west US merger.

>
> Canada is still a foreign country. Mergers with CP
> and CN will need to wait until domestic mergers
> are done, and truthfully, they can do plenty by
> swapping trackage rights and haulage, just as they
> are doing now.

Mexico is a foreign country as well, but that didn't stop KCS from buying TFM nor would it stop UP from purchasing the remaining 74% of Ferromex/Ferrosur! It was mainly the US STB that stopped the BNSF-CN merger attempt, not the Canadian government.

Aaron

I think KCS holds all the cards in a future merger battle. They sit squarely in the middle of the mess with a major east-west line.

NS's move with KCS could be a sign of things to come or just a move to keep access via the Speedway.

Once someone gets control of KCS, then everyone will scramble.

If NS gets control of KCS, it gives them access to Lazaro Cardenas (a primary alternative to West Coast ports for shippers in the route between Asia and North America). This basically means now there is a third transcon railroad joining CN and CP.

I do not believe the public interest and maybe not the stockholder's interest either would be properly served by any more mergers.
CN is a heads up outfit and so is CP and CSX is certainally not a
heads up outfit in my opinion. CSX is bad enough as it is with-
out getting any bigger or any merger with anyone.
Any railroad is only as good as its weakest link and the top
management of CSX is a very weak link.
I do not think any more mergers should be permitted for some time
to come.
s

retengr Wrote:
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> I do not believe the public interest and maybe not
> the stockholder's interest either would be
> properly served by any more mergers.
> CN is a heads up outfit and so is CP and CSX is
> certainally not a
> heads up outfit in my opinion. CSX is bad enough
> as it is with-
> out getting any bigger or any merger with anyone.
>
> Any railroad is only as good as its weakest link
> and the top
> management of CSX is a very weak link.
> I do not think any more mergers should be
> permitted for some time
> to come.
> s

Check the news from the Street for CSX's earnings--I think they are finally getting that ship turned around. Canadian Pacific--I don't closely follow them, but it is incredible to compare the "CN story" to that of the staid, frugal seemingly do nothing CP. They have gotten left in the dust by a competitor that not so long ago used to hemorrage money. IMHO, you are giving CP too much credit and not enough to the boys in Jacksonville--that kitty may roar yet.

The rumor mill has has had rumblings of CN supposedly checking out CSX for more than a year. I was even told by an unreliable source back in December that the two companies were going to have a meeting "someplace warm" in January. This was supposedly to iron out the details for a "big announcement" in the second quarter of 2006. Well, it is now the second quarter of 2006, and nothing has come of this.

For those of you that collect merger rumours, I've also heard that CN is interested in: KCS, BNSF, EJ&E and CP's D&H line. No word on whether or not Mr. H is interested in Athearn or Lionel.

A CN + CSX merger would really mess up the popular merger thoughts about UP+CP+CSX+FXE and BNSF+CN+NS+KCS wouldn't it? :)

AaronJ Wrote:
> With all due respect, I don't think the railroads
> see the CSX through Nashville and Birmingham as
> being any more of a "Chicago-New Orleans" route
> than the NS through Cincinnati, so this point is
> likely a complete non-factor. There is really
> only two roads that can truly tout a "Chicago-New
> Orleans" route and that is CN and UP. In
> addition, if you were to go by your logic, then
> the BNSF should never merge with the KCS since
> they have duplication in routes from KC to
> Houston, the UP should never merge with the CSX
> since they'd have duplicate routes across southern
> IL, the BNSF and NS should never merge since
> they've got duplicate routes between KC and
> Chicago, and on and on and on.
>
The route from CHI to N.O. was a direct passenger route many years ago with the LN and CEI cooperating. CSX runs freight directly south on it today from Chicago to as far as Birmingham, where freight is reclassified for N.O., Waycross, etc.

The CSX routes across S. Illinois are not duplicates. Through traffic on the B&O turns south to Nahville or Louisville on the L&N way before Cincinnati at either Vincennes or Mitchell. It does not go through to Queensgate anymore. The segment between Mitchell and Seymour is locals only. Avon is a gateway for mostly different destinations than Queensgate. Is that what you mean? Because UP and CSX are otherwise perpendicular in S. Illinois.

Not all duplicates are bad, BTW, like the Cotton Belt and MoPac, for example. But CN needs no duplicate to help with capacity. So CN-NS is more likely than CN-CSX. The Rathole is not a duplicate of the IC. Knoxville and Memphis are far enough apart.


> I wouldn't count out NS and KCS merging before
> BNSF as they've already gone into a joint
> ownership agreement with the Meridian line.
> Otherwise, I'd agree with the reminder that
> UP+Ferromex/Ferrosur would quickly follow after
> any BNSF-KCS merger.


I agree, but CSX would get some concessions, like an entry way to KC somehow, NS would be too strong for the STB's liking.

> > Afer that I see BNSF+NS and then
> > UP+CSX as a defensive merger, if anyone of
> their
> > boards even deems future mergers necessary.
> Plenty
> > of new business is still on the table without a
> > merger.
>
> This I don't see as being very likely until the
> very...very end of mergers and even then it may
> not happen as there is simply little to no shipper
> support now and into the foreseeable future for an
> east-west merger. The US class 1's will have a
> much easier go of it to merge with a Canadian road
> than a east-west US merger.
>
Mergers are done to increase market share. East-West US traffic is a pretty big apple compared to US-Canada trade, IMHO. Do Canadian RR's really want direct access to the Eastern US?

> > Canada is still a foreign country. Mergers with
> CP
> > and CN will need to wait until domestic mergers
> > are done, and truthfully, they can do plenty by
> > swapping trackage rights and haulage, just as
> they
> > are doing now.
>
> Mexico is a foreign country as well, but that
> didn't stop KCS from buying TFM nor would it stop
> UP from purchasing the remaining 74% of
> Ferromex/Ferrosur! It was mainly the US STB that
> stopped the BNSF-CN merger attempt, not the
> Canadian government.
>
> Aaron

Notice that KCS and UP BOUGHT those shares. No one would merge with companies as backwards as Mexican railroads. They were at least 80 years behind us. NdeM station agents were still getting bribes to spot cars.

As for Canada, their political climate has changed since the BNSF-CN proposal, post 9-11, post Iraq. They are no longer our closest lap dog. Those citizens might not want their truly precious RR's under American control. And they would be, regardless of where the HQ was located.

I still think BNSF-KCS would be the lowest hurdle for two merger partners to jump right now, then the picture might get clearer.

Interestingly though, CN has an American at the helm currently in one E. Hunter Harrison. Not the 1st time CN has had an American president though, take Robert A. Bandeen for example. Former president of the Grand Trunk who later took over as top dog at GT parent CN.

Dave in Cincinnati

That is certainly true, however they are not the Illinois National.

My question, with respect to all, is this: Are Canadian RR's more interested in merging with Eastern roads than UP and BNSF would be? What do we easterners import from Canada? Wheat, lumber, automobiles, what else? Compare that to PRB coal and petrochemicals from Wyoming and Texas. I think combining Western freight into single line moves over NS and CSX is a better choice than Canadian freight.

However, as was said previously, mergers are big messy affairs, esp. with the track record of UP, CSX and NS, and they may never happen anyway. But it is fun to speculate. No offense intended toward anybody.

the rumors i hear are this. KCS is the only road that is exempt from not being able to merge with anyone else. BNSF may take them, if it ever happens. they showed interest in them before. as we say out here near philly, pa. there will be two class one's left, BNSF, and UP. BNSF will take the east,UP will take the west. but this makes me wonder.IF this were ever to happen, there would once again be no competition, and the FRA would step in, and break it all down into branches, and maybe give shorts and regionals the interchange, helping them grow, and they, themselves become competitors? shippers nationwide would have two choices to ship their products. not everone would like either of the two. is this the reason not said by the FRA to block all mergers? sorts and regionals seem to have better service these days compared to the big guys.

CP in my opinion will not merge with anyone, unless it stays CP and is ran by Canadians. Not very likely then is it? CP has just brought Linda Morgan, Clinton's former head of the STB onto its board of directors. To me this can mean only one thing, CP is getting ready to do something big and looking at CP's performance for the past 20 years means they're going to sell something such as the SOO Line. As long as CP can maintain access to Chicago, whether through trackage rights or a haulage agreement they will be satisfied. CP, Clueless Pacific, Chaos Perfected, Can't Perform, Completely Pathetic, Crappy Pacific, and the list goes on. And yeah I currently work for these Morons, but they've sold my line already.

BNSF+KCS will put Mike Haverty back in the camp (ATSF) he left (was ousted from?) in the first place.

> I do not think any more mergers should be
> permitted for some time
> to come.
> s


I thought that the merger moratorium was lifted a couple years ago. There are more stringent rules in place for pursuing a merger. Only thing is that no one is interested in pursuing one right now.

Nick Wrote:
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> I thought that the merger moratorium was lifted a
> couple years ago. There are more stringent rules
> in place for pursuing a merger. Only thing is
> that no one is interested in pursuing one right
> now.

He didn't say they aren't permitted, he said he didn't think they should be permitted...big
difference.

Nick Wrote:
-------------------------------------------------------
> > I do not think any more mergers should be
> > permitted for some time
> > to come.
> > s
>
>
> I thought that the merger moratorium was lifted a
> couple years ago. There are more stringent rules
> in place for pursuing a merger. Only thing is
> that no one is interested in pursuing one right
> now.


No one's interested? Tell that one to managers of DM&IR, B&LE, BC Rail, WC, IC, and Ontario Northland.