Is Merger Mania back again?

Canadian Pacific’s recent attempt to seek a merger with CSX was quickly rebuffed by the target. Yet in analyst discussions and interviews following the announcement that merger talks had concluded, CP’s CEO Hunter Harrison has continued to express optimism that more mergers are possible. To read more on this, click here.

Is Mr. Harrison’s optimism misplaced?

It has been nearly fifteen years since BNSF and CN’s proposed combination was announced and later quashed by the STB. Shortly after BNSF and CN announced their merger plans, the STB placed a fifteen month moratorium on rail mergers and promptly initiated an Advance Notice of Proposed Rulemaking (STB ExParte No. 582) to consider changes in its merger review rules and procedures. When the final rules were adopted in June, 2001, the STB raised the bar for obtaining merger authority to combine two Class 1 railroads, effectively requiring the carriers to show that the proposed transaction would promote competition and not simply avoid a reduction in competition. To read more about the STB decision click here. Although these rules have yet to be tested (and the composition of the STB has changed significantly since the adoption of the original rules) any proposed merger is likely to receive strict scrutiny from the STB.