Can railroads buy each others' stock?

[Ulrich]

I would say probably yes with certain restrictions. I've been following the CSX - Children Investment Fund story with some interest. Here we an aggressive foreign hedge fund with members appointed to the board of directors. If a foreign based hedge fund can do this wouldn't it be possible for another railroad to buy shares in CSX and in the same way gain a controlling interest? Maybe BNSF could buy a large chunk of Canadian Pacific for example.

[CSSHEGEWISCH]

Any such purchases would have to be reviewed by the STB.

[Anonymous]

Isn't that what UP did with the CNW?  Maybe I heard wrong, but I thought UP was a significant shareholder in CNW before they decided to buy them outright to prevent another raider from getting them, like what almost happened.

[Ulrich]

I guess it could get interesting...imagine a couple of NS people with NS driven agendas on  CSX's board of directors or vice versa.

[piouslion1]

Any such purchases would have to be reviewed by the STB.

I imagine that the SEC (Securities and Exchange Commission) would probably weigh in as well, depending on how how large a portion the buying company would have. The Missouri Pacific (of fond memory) did some maneuvors like that back in the 60's I think with ATSF as a target.*

*Someone more knowledgeable might want to check the history for me.

PL 

[rrnut282]

I seem to recall a thread a while back where someone stated that Pennsy owned N&W stock and the dividends paid by N&W kept the Pennsy afloat (sort of) until merged into Penn Central.

Read more about it here:   http://cs.trains.com/forums/2/320971/ShowPost.aspx#320971

[CS_heX]

I guess it could get interesting...imagine a couple of NS people with NS driven agendas on  CSX's board of directors .

I don't think that NS is that stupid.

[Anonymous]

Wait a minute - the SCL explored a merger with SP, and SCL didn't in the end like the looks of things and backed-away.  But SP liked it, and started buying more and more SCL stock in a hostile takeover attempt.  That's at least a big part of the reason why SCL got together with the Chessie System.

[Ulrich]

That would make NS smart not stupid..to have seats on a competitor's board?

[caldreamer]

Yes, railraods CAN buy each others stock.  Dependins on their position (how much they own) the STB would weigh in  If it is a minoriy position (a small percentage of the outstanding stock), I do not think anyone would would say anything.

 PRR did own a piece of the N&W among other railroads over the years.

 

[n012944]

That would make NS smart not stupid..to have seats on a competitor's board?

 

Not only that, it would have been very good to NS bottom line in the gains CSX stock alone, as it has made large gains in the last year.  There are a few railfans that are too juvenile in their dislike for a railroad to see such things.

[piouslion1]

You are right on that score. We all have to remember that railroading in America is first and foremost a business. A business that for all its history (with a few exceptions in WWI) has been and continues to be one that seeks profit in its activities, actions and direction. 

[henry6]

Read your railroad histories!  Every railroad owned other's stocks, some to the point of control.  Of course there were those who were intereseted in the well being of thier partners and connetctions, and there were those who were intererested in there own well being.  Reportedly the NYC influence on the DL&W through stock ownership and Board members kept the DL&W from having a faster schedule for the Phoebe Snow.  And the Old Woman's NYC influence was to be a sort of laboratory for technologies like diesels, the engines, the fuels, etc. before NYC were to use them.   Sante Fe reporteldy had an intrest in the LV and the L&HR while PRR kept a big portion of LV stock in thier portfolio.  DL&W and NKP were more than just kissing cousins until hurricanes Diane and Hazel cost caused the NKP to ask the DL&W to move on.  The takeovers, the influences, the shenanigans, the legalities, the realities, the benefits, are all in the history books!  Of course a lot of that nonsense can happen today with the STB, SEC, and the Justice Department scrutenizing everything.

[AntonioFP45]

Wait a minute - the SCL explored a merger with SP, and SCL didn't in the end like the looks of things and backed-away.  But SP liked it, and started buying more and more SCL stock in a hostile takeover attempt.  That's at least a big part of the reason why SCL got together with the Chessie System.

I remember that!

Funny, by the look of things today, it seems that the SCL-SP merger might have worked out well in the long run.  Would have been our first Class 1 transcontinental railroad.

[WM7471]

IIRC the Pennsylvania Railroad had a subsidiary holding company called PennRoad that existed right up to Penn-Central and controled several railroads (Lehigh Valley and N&W were supposedly among them) they also supposedly had large blocks of stock, but did not actually have day to day control of a number of other roads (Wabash, Seaboard and Atlantic Coast Line are some that I have heard mentioned.).  

I understand that it was not at all unusual for railroads to own stock of the railroads that were their main connections.  However, both the old Interstate Commerce Commission and the S.E.C. watched this like a hawk to prevent one railroad from buying a competetors stock and using the control to be "anti-competetive".  The B&O owned about 22% of the Western Maryland's stock.  WM took B&O to court and the stock was forced into a non-voting Trust Fund.  B&O still got the dividends, but could not exercise control of WM.  It was not until the formation of Chessie that WM asked the courts to release the Trust, and allow the B&O/C&O to merge WM.  Of course most of the Anti-competition rules began to disappear in the 70's, and vanished with Staggers.

However, the SEC Anti-Trust rules about stock ownership between companies and ownership disclosure rules still apply.

[R. T. POTEET]

You betch'um , Red Ryder!

It wasn't until the ICC came into existence in the late '80s - that's the 1880s - that such stock acquistions came under governmental scrutiny. The Louisville and Nashville Railroad gained control of the Nashville, Chattanooga, and St Louis Railroad earlier that same decade in order to forestall that latter railroad from extending itself into St Louis, a destination L&N itself had in mind. The NC&STL maintained operational independence until finally merged into L&N in the mid-'50s - that's the 1950s - in what is considered by many to be the beginning of the great merger frenzy of the late 20th Century.

On the other hand PRR got control of the N&W - note the Tuscan Red passenger cars and the position light(?) signals - but was consistantly prohibited from merger by the ICC. Eventually they had to divest themselves of the N&W stock as a condition of the PennCentral merger.

[piouslion1]

In this thread, one must remember the name Harrimann for such activity. He bought whole railroads. One in particular out of bankruptcy and turned the thing around. 

To this day when one reads the Union Pacific annual reports, it is not unusual to read the line "since the receivership"  as a time marker in the company reference to its history.