The Burlington Northern Sante Fe Line and Canadian National Railroad announced a halt to their proposed $5.1 billion merger, after being dealt a major blow by the U.S. Court of Appeals in July.
The court upheld a 15-month moratorium on all major rail mergers in the U.S. imposed by the Surface Transportation Board.
The 2-1 ruling meant that attempts to merge Canadian National Railway and Burlington Northern Santa Fe would be frozen until mid-2001.
The two companies said they were deeply disappointed by the court's decision, and responded by abandoning a merger that, if approved, would have created a new railway operating about 50,000 miles of track, linking all parts of Canada to the western and midwest U.S., and down to the Gulf of Mexico.
"It is not in the interests of our shareholders to assume the risks involved in waiting up to two years for a decision on our transaction by the regulator in the United States," was the joint statement issued by Paul Tellier, president and CEO of CN, and Robert Krebs, CEO of BNSF.
The entire proposed merger process has been followed closely in the Pacific Northwest, where ports like Seattle, Tacoma and Everett are directly affected by anything happening to one of its primary service lines - BNSF.
Craig Hautamaki, the Port of Seattle's general manager, container line business, expressed some surprise over the merger being called off.
"Six months ago the two railroads told us Œif the moratorium stays, this will probably kill the merger.' However, we met with Krebs and Tellier recently, and they said they would take the delay into consideration."
Hautamaki said the Pacific Northwest ports were starting to come around on the proposed merger, when, initially, the ports had been catious and unsure about a Canadian rail line having more control over U.S. rail/cargo routing, plus possible pricing changes redirecting cargoes through competitors' gateways
Now he says, "The merger was the right thing to do. It made economic sense, and it made strategic sense."
Recent meetings and assurances from both railroads regarding PNW service was encouraging for the ports, according to Hautamaki, and he said other possible merger alternatives could be worse for the Puget Sound ports. CN might merge instead with other major railroads in the Northeast, such as CSX Transportation or Norfolk Southern, and bypass the region altogether, he explained.
Hautamaki is also not convinced this is the end of the line for the rail merger. "The question is, what happens next? We won't find out about [STB] guideline changes [to rail mergers] until October. The CN and BNSF railroads are very successful railroads...they'll go back to the drawing board." Hautamaki speculated that, depending on what the new guidelines are in October, they might make the two railroads think, "maybe we can work with that."
Whatever happens, Hautamaki said, "I think all the railroads have gotten a window into how other railroads work and what they're doing. The wheels of change are still moving."
- Story by Alison Bate and Peter Hurme
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