Eastern Railroad Discussion > Lateral Mergers.

Seems to be substantial interest on TO on the merger topic UP-CSX and whatever.
Rather than a merger of strategic scale could some railroads perhaps move in a direction smaller and actually grow business through lateral merger(s)?
In today's Wall Street Journal newspaper there was a small article about lumber manufacturer Georgia Pacific considering selling and/or divesting its "distribution network" comprised of 12-15 U.S. locations and one Canadian location. Apparantly, one of the investment houses has been retained to help GP through this process.
This lateral merger or even a straight acquisition by a railroad might work in this situation, through gaining lumber (including rising prices) traffic source(s) in addition to any possible amalgation with current and proposed intermodal terminals and traffic flows.
This might be more realistic than all this focus on straight mergers.

What about a merger between a railroad and a trucking company, for example JB Hunt and BNSF, or Schneider National and NS, instead of railroad to railroad mergers?

FECSD40-2 Wrote:
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> What about a merger between a railroad and a
> trucking company, for example JB Hunt and BNSF, or
> Schneider National and NS, instead of railroad to
> railroad mergers?

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I wouldn't be surprised to see UPS or JB or Schneider "buy" guaranteed access to specific rail corridors. Prob as an extension of the current premium service UPS gets. The I-81 corridor in Virginia and North Carolina plus I-75 from I-81 to Atlanta would be a good place to start. Maybe in conjunction with state user fees on the highways.

Actual Truck + rail mergers (UP+Overnite, etc) haven't been a wonderful success, though.

Lateral mergers work only if they'll add significant business. I thought a lot of those shortlines and industrial RRs were originally spun off from a Class I; seems weird for them to rejoin, unless there's some overriding advantage.

I thought I read somewhere that Class Is aren't as good at getting new local businesses as a regional or a shortline would. Those guys seem to be more small-guy oriented, and if they can push a shipment out to the big guys for a long trip somewhere, the better it is for all. But, it seemed that the Class Is are more interested in the transcon big bulk stuff....

Kennedy

It seems that CSX has already done a lot of this.

Firstly, it has taken over regionals Pittsburg & Lake Erie, and the Richmond, Fredericksburg & Potomac.

Secondly, CSX Transportation sibling CSX Intermodal owned a barge company and a shipping company (was it Sea-Land or Sea-Train?). In addition, I recall that the Norfolk & Western was once the majority stockholder in Piedmont Airlines.

Thirdly, a part of the concept of which you speak could be termed "building a conglomorate." CSX Realty owns land adjacent to railroad tracks. This is land that could be developed with companies that provide the railroad with business. CSX could theoretically provide a "package deal" involving both real estate and transportation.

A "lateral merger" is by no means a new concept but has been part of the trade for years.

HaggisKennedy Wrote:
>
> I thought I read somewhere that Class Is aren't
> as good at getting new local businesses as a
> regional or a shortline would. Those guys seem to
> be more small-guy oriented, and if they can push a
> shipment out to the big guys for a long trip
> somewhere, the better it is for all. But, it
> seemed that the Class Is are more interested in
> the transcon big bulk stuff....
>



There's a reason shortlines are better at this. They pay a lot less. Lower wages = lower costs = more ability to do low-volume work. If they had Class 1 wage scales, they'd be dead in the water. As it is, not a lot of shortlines actually do well financially.

BobE

Think globally. This may even happen in our lifetime. Since our economy is changing from a manufacturing base to a more service oriented sector, and more production in the FarEast, look for the creation/merger of several companies from all modes to take place. I invision a container shipping company to hook up with several railroads, truck load carriers, LTL carriers, package carrier, and possibly even an airline to create a system that would be one-stop shipping just like Walmart had done with the creation of the SuperCenters.

It was Sea-Land which international portion was acquired by Maersk. It was Hays T. Watkins, who envisioned a global transportation company. Basically if it needed to move, CSX had the means to move it, anywhere theoretically on the planet. But recent years have seen the company reconcentrating itself on railroad and affiliated services. (Intermodal mainly) Current dogma is that it better to be expert at one thing, than to be middling at many. The sale of Sea-Land was the first step in that regard and certainly the proceeds from the various sales paid some bills. But CSX still has the Greenbrier, which is sacrosanct, even though it's flirt with resorts petered out with international shipping. Grand Teton Lodge was sold too.