Potential merger between Canadian Pacific Railway and CSX Corp

A potential merger between Canadian Pacific Railway Ltd and CSX Corp may be underway, with the Canadian railroad operator recently approaching CSX Corp with an offer.

According to the Wall Street Journal, the offer was made in the past week and was rebuffed. The report cited people familiar with the matter, adding that it remains uncertain whether Canadian Pacific will continue to pursue with the plan.

CSX spokesperson Melanie Cost and Canadian Pacific spokesman Martin Cej both refused to make a comment on behalf of their companies over the matter.

If the merger does goes through it would create one of the world’s largest railroad companies.

Canadian Pacific is the second largest Canadian railway company in terms of revenue, with a market value of over $32 billion. Florda based CSX is America’s third largest carrier, worth around $30 million.

The merged company would have around $18 billion in annual revenue and a total of 35,000 miles of track, more track than the industry’s leading railroad companies, which are BNSF Railway, with 32,000 miles of track, and Union Pacific, with 31,800 miles of track. A CP-CSX merger would add 14,000 miles to CSX’s 21,000 miles of rail network, stretching from Vancouver to Chicago and New York.

According to an article by David George-Cosh, at The Wall Street Journal, the deal could mainly be driven by crude oil.

A merged CP-CSX company would allow them control more of the supply chain, help cut costs and charge high prices if they can effectively transport crude from western Canada to the eastern seaboard.

One of the main hurdles of the deal going through is receiving consent from US Surface Transportation Board. The board is known to intervene in deals in the railroad industry. In 2000 the agency disapproved of a merger between Canadian National Railway and Burlington Northern. Another obstacle that the potential merger may face is from National security officials.