OMAHA, Nebraska—The head of CSX said Wednesday he doesn’t think railroad mergers—like the one Canadian Pacific has proposed with Norfolk Southern—are a good idea.
“I really don’t think mergers within the industry in any form make much sense,” said Michael Ward, CSX’s chairman and CEO.
The problem with railroad mergers is they don’t offer significant benefits, and federal regulators might not approve them, Ward said. Regulators could also require railroads to make changes as part of approving a deal that would add costs, he said.
The US Surface Transportation Board hasn’t approved any major railroad mergers since the rules for them were toughened in 2001.
So far, Norfolk Southern has rejected all of Canadian Pacific’s offers, but the back-and-forth may evolve into a proxy fight because Canadian Pacific wants shareholders to decide.
Canadian Pacific continues to press its case for the merger. It issued a report earlier this week in support of the deal, saying a merger would allow railroads to handle more freight without adding more tracks and rail yards.
Ward said major railroads, which are known as Class I railroads, already have plenty of room to improve and expand capacity without a merger. And most possible deals wouldn’t involve much track overlap, so they wouldn’t offer many synergies.
“I don’t believe it’s needed. I think each of the existing Class I railroads have an opportunity to create great shareholder value without a merger,” Ward said.
About a year before Canadian Pacific made its first offer to buy Norfolk Southern, it approached CSX Corp. about a possible merger, but those talks didn’t progress beyond initial discussions.