Just one opinion - If this ends up being the last round of Class 1 mergers in North America, the end result will be CSX and NS being divided up between BNSF, CN, CP and UP. Canada will ensure that as a country it owns two railroads. The United States will be the same - it does not let all airlines be considered foreign, for example. Freight railroads are an important piece of economic infrastructure and will stay under the "control" of the US. As a result, we will end up with all four - BNSF, CN, CP and UP - operating in the states east of the Mississippi River, thereby fulfilling the current merger rule requirement that a merger must enhance competition. This will be a larger scale version of the Conrail sale and division between CSX and NS, where a monopoly in the US Northeast became a duopoly competitive situation. If this round of mergers occurs, the eastern US will go from a duopoly to a 4-competitor oligopoly for rail freight transportation. Again, just one opinion.
I really have trouble seeing four railroads (BNSF, UP, CN and CP) dividing NS and CSX (not to mention KCS) in a way that satisfies all. If they succeeded, I'm afraid a perfect hash would be made of some nice stretches of railroad, as happened with the poor old Water Level Route, which was divided between only two.
One theoretical scenario - just an opinion:
If it does happen, there will be lots of shared track similar to the Joint Line in Colorado, Cajon Pass and Tehachapi Pass in California, etc., as a few examples. The Conrail Shared Assets areas in Detroit and New Jersey will be owned by four instead of two. There are four routes east of Chicago at least through Ohio - ex-NYC, ex-Pennsy, ex-B&O, ex-Nickel Plate - and then east of Ohio there would have to be shared trackage.
Four railroads operating north of the Ohio River actually might end up being more logical, with CP getting routes to a Gulf Coast port, perhaps via KCS being rolled into the mix, and both CN and CP getting or sharing a route south from Ohio to Atlanta.
BNSF and UP have much more financial firepower at their call, so it is likely that they would be the purchasers of CSX and NS and then CP and CN would end up being intervenors and would be allowed to buy via STB directives portions of the two eastern railroads as part of the final settlement.
BNSF and UP would be the "go everywhere" entities east of the Mississippi, whilst CP and CN would end up with a general "loop" from Chicago south of the Great Lakes to the Northeast and back up to Montreal, lines to at least one or perhaps two Gulf Coast Ports such as Port Arthur or Beaumont TX, New Orleans LA (CN already goes there), or Mobile AL, and a line from Ohio to Atlanta. That would effectively give CP and CN a "tree" shaped network, with their lines from Vancouver to Alberta as the "trunk" of tree, then lines north of the Great Lakes, south around the Great Lakes, down to Atlanta, and down to the Gulf Coast as the main stems branching off the trunk. BNSF and UP would continue to have more of an east-west orientation, but stretching coast-to-coast instead of ending at the Mississippi River.
It would be possible to have four viable North American railroad systems operating in that configuraton - UP and BNSF would each be around 45,000 miles of mainline track, and the two Canadian roads would each be up around 25,000 with their permanent monopolies in Canada and NAFTA trade between the two countries as the base of their traffic.
It is easy to come up with a scenario, though, when I don't have to spend any of my own money! And there are many other perfectly logicial scenarios that others will develop, for sure. It is a great and fascinating and fun discussion for those of us interested in railroading - I would love to hear some other theoretical solutions that others think through! It will be interesting indeed if the balloon goes up - CP and Hunter Harrison seem determined to hit the "Launch" button - so we will probably learn the outcome in fall 2016, one would think.
Here’s a timeline of the events leading up to CP Rail annual meeting on Thursday in Calgary.
Sept. 23, 2011 — Pershing Square Capital Management begins acquiring a stake in Canadian Pacific Railway, spending $1.4 billion, the largest single initial commitment to any investment for the U.S. hedge fund....
http://www.thestar.com/business/2012/05/17/timeline_of_cp_rails_proxy_battle.html
Will we see this again for NS?
Yes. But this reminds me of the ending fight scene from the latest Jurrasic World movie where the two T-Rex variants are battling it out on the edge of the lake and then the giant carnivorous whale rises up and chomps the "aggressor" T-rex and it is game over - swallowed by the gargantuan whale.
Like "Gobble Gobble Gobble"? Maybe they are trying to bite off more than they can chew.
I think CP & Harrison are trying to attack NS since Squires just recently was put in the top job and 'may' be percieved as a weak adversary in playing the game of M&A.
Never too old to have a happy childhood!
I looked at both the BNSF and CSX system maps. I would be a perfect fit between the two railroads. With gatewys at Chicago, Springfield, St Louis and Memphis, the one railroad to have trackage from New England to Florida in the east to to all three west coast states.
Can we wonder if Buffet is buying either or both CSX and NS stock to start a proxy fight ? Is it still 4.9% before disclosure ?
blue streak 1 Can we wonder if Buffet is buying either or both CSX and NS stock to start a proxy fight ? Is it still 4.9% before disclosure ?
The Feds would not allow that..maybe if the American Libertarian Party wins next November...Just kiddin', there's more of a chance that Berkshire Hathaway will convert all of BNSF's trackage to Hyperloop..
"I Often Dream of Trains"-From the Album of the Same Name by Robyn Hitchcock
dakotafred I really have trouble seeing four railroads (BNSF, UP, CN and CP) dividing NS and CSX (not to mention KCS) in a way that satisfies all. If they succeeded, I'm afraid a perfect hash would be made of some nice stretches of railroad, as happened with the poor old Water Level Route, which was divided between only two.
Are you ready? Here comes OPEN ACCESS!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!(Sorry, as near as I can tell I am possessed by the Ghost of Futuremodal right now)...
Given how many posters on here are of a rightist persuasion, I wonder how Warren Buffett's endorsement of Hillary today makes them feel about a BNSF takeover of NS?
C&NW, CA&E, MILW, CGW and IC fan
Excerpt from Business News Network, Dec. 16
http://www.bnn.ca/News/2015/12/16/CP-Rail-revises-Norfolk-offer-higher-says-new-bid-adds-34-billion.aspx
The Calgary-based railway on Wednesday morning held a conference call and offered shareholders in Virginia-based Norfolk Southern up to $25 more per share via a contingent value right, a publicly traded security that is similar to an option. CP says the move adds about $3.4-billion to the purchase price, and investors can sell the security upon the regulator’s decision on the deal in October, 2017.
“Think about this as an insurance policy you can sell,” said Bill Ackman, a CP board member and head of the company’s largest investor, Pershing Square Capital.
Norfolk Southern has already rejected two previous offers from CP, including one made last week.
"I hate to tell you, this is the way I grew up, as a street fighter, but if this is going to be a street fight then so be it,” CP Rail chief Hunter Harrison said on the call.
schlimm Given how many posters on here are of a rightist persuasion, I wonder how Warren Buffett's endorsement of Hillary today makes them feel about a BNSF takeover of NS?
Anyone that knows the slightest thing about him already knew this would be the case. He only votes Democrat.
While Warren is the definition of a liberal and about as extreme as one could find while I'm very conservative (A fact that I'm sure you've guessed by now), I personally have no qualms with BNSF despite my personal opinion of the leader of the group that owns the railroad.
BNSF is a well ran company and while I don't like the man in the slightest, this relationship with his financial empire provides them with capital and security that allows them to concentrate on long-term goals instead of short-term bolstering of their balance sheet to give the illusion of being more profitable than it really is.
If more mergers have to happen despite the hurdles and lack of clarity over any real benefits, I'd have no concern about BNSF getting involved in the bidding.
I'd be disappointed if they didn't even try.
dakotafred schlimm Given how many posters on here are of a rightist persuasion, I wonder how Warren Buffett's endorsement of Hillary today makes them feel about a BNSF takeover of NS? No effect. I do always wonder when a good businessman like Buffet, seemingly ignoring his own life experience, comes down on the Democratic side; but then I reflect that expertise in one area does not guarantee expertise or even competence in another, such as politics. Of course, great success, such as Buffet's, tends to make us feel wise across the board -- which, manifestly, we are not -- and eager to share.
What evidence do you have to suggest that Buffett is ignoring his (apparently successful) life experience or in the realm of political understanding he has any less expertise or is any less competent than others, such as yourself or I?
IIRC the STB or Justice required him to divest all other RR stocks.
Berkshire Hathaway owned about 23% of BNSF ($10 billion) and had positions in UP and Norfolk Southern at the time it purchased the rest of BNSF.
Berkshire offered $100 per share which was a 30% premium to the share price of about $77 at the time. Berksire paid about $26 billion for the remainder of BNSF at about 60% cash ($15.6 billion) and 40% in Berkshire Hathaway Class A stock ($10.4 billion).
Berkshire Hathaway could do almost the same thing again and offer NS share holders double the cash and the rest in Berkshire Hathaway Class A stock without breaking a sweat.
Throw in similar corporate cultures to build the railroad, might that deal might be more attractive to NS shareholders than the CP deal?
http://www.marketwatch.com/story/berkshire-buys-burlington-northern-2009-11-03
All the talk about congestion relief in Chicago highlights the fact that to really have congestion relief in Chicago, because of Lake Michigan, traffic heading to the Northeast can only be diverted around it to the south. That is a more compelling reason why a BNSF-NS combination would actually be more beneficial in that regard.
Specfically, with control of the ex-Wabash and Nickel Plate routes, BNSF gains a direct bypass speedway for traffic heading for Indianapolis, Detroit, Columbus, Cleveland, Buffalo, Pittsburgh, Philadelphia and New York/New Jersey.
With control of the Kankakee Belt and Streator connection, it already has a bypass to the south of Chicago, although that route does turn due north and runs through the southeast edge of the Chicago Metroplex.
But traffic from Minneapolis and the former GN-NP territories heading to the Northeast could also bypass Chicago by continuing south of Galesburg and getting on the Iowa Interstate to Peoria on the NS and then access those other bypass routes.
With control of NS, traffic for Louisville and Cincinnat could now go by the former Frisco and Southern across lower Illinois, thereby also bypassing Chicago.
In effect, Chicago in the long run probably ends up being more of a "destination terminal" for BNSF traffic because much of the former run-through traffic could be rerouted on at least three alternate bypass routes.
Since BNSF is for the most part an "intermodal expert" there are also several other advantages of NS ownership. In a "post-Panamax world", direct access to the ports of Jacksonville, FL, Savannah, GA and Charleston, SC, and connection to FEC in Jacksonville creates intermodal hauls of between 800-1100 miles to the cities of Buffalo, Cleveland, Detroit, Chicago, Kansas City, and Dallas from the ports that are closest to the Panama Canal.
And in the south, BNSF would have single line haul from the west coast for intermodal all the way to Charlotte, NC or from Mexico all the way to Massachusetts.
Of course, that goes for other traffic besides intermodal.
All those Chicago bypass options, plus BNSF's ownership of the former Frisco to Birmingham, Alabama as an outlet for post-Panamax intermodal traffic to the lower Midwest and Plains states makes BNSF a more logical owner for NS than CP if there is to be a combination.
Nobody knows what will happen until it happens, of course. Interesting times, indeed!
Canadian Pacific officials today used the Christmas holiday period to promote their belief that CP's proposed takeover of Norfolk Southern Corp. would benefit the Chicago-area rail hub.Noting that some Class Is will cease service during the upcoming Christmas holiday, CP said the CP-NS merger would help alleviate traffic congestion in the Chicago region and create opportunities for rail competitors to provide "improved service" to their own customers.
In a prepared statement, CP officials said that Union Pacific Railroad, CSX Corp. and NS will halt service through Chicago during Dec. 24-25.
http://www.progressiverailroading.com/canadian_pacific/news/Canadian-Pacific-Merger-would-benefit-Chicago-during-holiday-shutdown--46786
Ho Ho Ho.
Talk about your lame reasoning.
What a joke this whole merger talk is getting to be. Why anyone thinks anything good will come of it is beyond me.
It's been fun. But it isn't much fun anymore. Signing off for now.
The opinions expressed here represent my own and not those of my employer, any other railroad, company, or person.t fun any
zugmann Talk about your lame reasoning. What a joke this whole merger talk is getting to be. Why anyone thinks anything good will come of it is beyond me.
Thanks to Chris / CopCarSS for my avatar.
Victrola1 Canadian Pacific officials today used the Christmas holiday period to promote their belief that CP's proposed takeover of Norfolk Southern Corp. would benefit the Chicago-area rail hub.Noting that some Class Is will cease service during the upcoming Christmas holiday, CP said the CP-NS merger would help alleviate traffic congestion in the Chicago region and create opportunities for rail competitors to provide "improved service" to their own customers. In a prepared statement, CP officials said that Union Pacific Railroad, CSX Corp. and NS will halt service through Chicago during Dec. 24-25. http://www.progressiverailroading.com/canadian_pacific/news/Canadian-Pacific-Merger-would-benefit-Chicago-during-holiday-shutdown--46786 Ho Ho Ho.
So CP doesn't intend to honor Christmas?
BaltACD So CP doesn't intend to honor Christmas?
Well there’s still their pretty train of course.
http://www.cpr.ca/holiday-train/canada
Excerpt from CP website, Dec. 21
http://www.cpr.ca/en/investors/cp-reiterates-call-for-consistent-efficient-service-solution-for-chicago
CP also notes that the most vocal opponents to a CP/Norfolk Southern Corp. merger that would improve shipper optionality through and around Chicago will halt service for up to two full days during the Christmas period.
Union Pacific Corp. will halt service through Chicago from 7:00 a.m. local time Dec. 24 to 7:00 a.m. Dec. 26. CSX Corp. will shut down from 3:00 p.m. Dec. 24 until 7:00 a.m. on Dec. 26 and Norfolk Southern will close from 2:00 p.m. Dec. 24 to 11:00 p.m. on Dec. 25.
"CP recognizes that the North American economy does not take vacations and many shippers require 24/7 service 365 days a year through Chicago, and thanks to CP's dedicated and hardworking railroaders, CP can provide that service…"
The economy may not take a vacation as such, but the reality is that, apart from shopping, industrial activity is greatly reduced for the week between Christmas and New Year. If a plant is shut down until January 3rd, the only one who benefits from the carload being placed on December 26th is the railroad, who can charge the extra per diem. Some managers recognize this and take advantage of the opportunity to give their employees some guaranteed time with their family on Christmas Day. But others are more callous.
You may remember from a recent post by JF Turcotte that EHH had an curious interpretation of 365 days a year service out of Halifax while with CN. While he ran a train every day, that was not always the service provided to the shipper as containers were left sitting at the dock waiting for a day or longer because the "train was full". They did require the service, to keep the route time competitive, but CN declined to provide it. Maybe he has since changed his views .... tooth fairy anyone!
It is tough to warrent service to plants that are shut down for the holidays.
Carriers make their holiday plans based on the customers holiday requirements. CP's statements are just so much puffery!
Let the extradinary silliness begin! Up to now, it's only been normal silliness.
-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/)
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