Despite rumors, Canadian Pacific Kansas City (CPKC) said Tuesday that the railway company is not interested in participating in “immediate rail industry consolidation.”
“We believe that a transcontinental merger would trigger permanent restructuring of the industry and result in a disproportionately large railway whose size and scope would require others to take action,” said CPKC President and CEO Keith Creel. “This will likely result in an unnecessary wave of railway mergers that today is not the best way to support American businesses nor the public interest, and has the potential to create more issues than it solves.”
CPKC’s announcement follows remarks Monday from Berkshire Hathaway Chairman Warren Buffett, who told CNBC that Berkshire — owner of BNSF Railway — has no plans to pursue buying CSX Corp. or Norfolk Southern Corp. when asked about Union Pacific’s proposed multi-billion-dollar acquisition of Norfolk Southern.
Earlier this month, activist investor Ancora Holdings Group LLC, a minority shareholder in CSX, called on the company to explore potential merger discussions with both BNSF and CPKC.
But according to CPKC’s statement, the company said it doesn’t think that more rail consolidation is necessary for the industry as currently structured.
The company also said it remains focused on delivering “more of the benefits and unique value-creating opportunities of its three-nation network,” which connects shippers in all parts of North America via interline service options.
“CPKC strongly feels, given what the existing competitive landscape has shown it can deliver, any major rail merger poses unique and unprecedented risks to customers, rail employees and the broader supply chain,” the statement says. “Those risks would be exacerbated by the inevitable follow-on consolidation.”
As the industry currently stands, according to CPKC, the existing six major railways in the United States are capable of offering customers high quality and near-seamless transportation services across the continent.
And as evidenced by previous rail network alliances by CPKC and CSX in the Southeast, as well as the recent mega merger announced by BNSF and CSX, there are still opportunities for further cooperation between “willing” railways to improve service while preserving optionality for shippers, said CPKC.
In fact, said the railroad company, many of the kinds of benefits asserted in support of transcontinental mergers can be achieved through new and expanded industry partnerships, customer service innovations, and additional cooperation among railways.
“CPKC continues to pursue these opportunities, such as its recently announced collaboration with CSX on the Southeast Mexico Express service linking the U.S Southeast to Mexico,” said CPKC.
Today, the U.S. rail network has the necessary capacity and operational fluidity to safely drive many more years of service improvement, volume growth, truck conversion, and resulting value creation for the nation’s rail shippers in support of the national economy, the company added.
“The public’s interest is best served by the nation’s railroads focused on delivering reliable, “truck-like” service while investing in their networks to increase U.S. rail network capacity required for sustainable growth, rather than pursuing additional rail consolidation in an industry already greatly consolidated,” according to CPKC’s statement.