Norfolk Southern CEO says rail mergers won't work

AP News
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Posted: Oct 22, 2014 3:21 PM

OMAHA, Neb. (AP) — Norfolk Southern Corp.'s CEO doesn't think railroad mergers are a good idea even if regulators might approve one.

CEO Wick Moorman said Wednesday during a conference call on Norfolk's Southern's quarterly results that he doesn't think railroad mergers "make sense at this time."

The idea of a rail merger has been on investors' minds lately because Canadian Pacific approached CSX about a possible deal. CP CEO Hunter Harrison said Tuesday that talks fell apart after several meetings because they couldn't agree on key issues.

CP also considered approaching Norfolk Southern, but opted not to after deciding CSX was a better fit.

Harrison said he thinks a well-structured, well-done rail merger could be lucrative for investors and the railroads, and it could ease congestion around the rail bottleneck of Chicago if the merger diverted traffic around that problem area.

But Moorman disagrees about the potential benefits of a rail merger.

"Putting these big companies together is very difficult, and at least historically, has led to significant service problems for some period of time," he said.

Moorman said there's also less of a financial incentive for mergers because there aren't many redundant routes or facilities.

Moorman also said regulators could eliminate any benefits to a merger by imposing restrictions.

"I think that a major railroad merger is not a good idea. It's highly problematic," Moorman said.

Those comments seem to spell the end of a possible merger for Canadian Pacific Railway Ltd. right now because Harrison said CSX, Norfolk Southern or Kansas City Southern made the most sense as potential partners. Harrison said Tuesday that a deal with Kansas City Southern is unlikely because that railroad's stock is expensive.

The other major North American railroads are BNSF, Union Pacific and Canadian National.

Norfolk Southern Corp. operates 20,000 miles of track in 22 eastern states and the District of Columbia.

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Online:

Norfolk Southern Corp.: www.nscorp.com