Is a CSX-CP Combination Coming?

Wall Street things that CSX and Canadian Pacific are the two most likely Class 1 railroads to seek a merger, even if doesn’t likely to occur in 2019.

A research note issued by Wolfe Research noted that hedge fund TCI is now the second largest shareholder in CP as well as a holder of shares in three other railroads.

CP CEO Keith Creel has expressed support for mergers and with a Republican in the White House the climate for mergers may be more favorable.

However, Wolfe acknowledged that winning support of the U.S. Transportation Board might be a tall order, particularly trade tensions between the United States and Canada might make Canadian regulators loath to approve a merger.

Independent consultant Anthony B. Hatch of ABH Consulting takes issues with the Wolfe report, saying that although TCI – also known as The Children’s Investment Fund – sought to control CSX a decade ago, it did not prod CSX to seek a merger partner.

Hatch also thinks Republicans are reluctant to seek to choose winners and losers in battles between corporate interests

Any proposed Class 1 merger would trigger fierce opposition from shippers. Hatch also doubts that there is enough to be gained from a CSX-CP combination.

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