North America - Canadian Pacific Railway CEO Hunter Harrison still believes in railway consolidation, even though a deal with Florida-based CSX is off.
 
In a conference call with analysts and reporters Tuesday, just a day after CP announced that exploratory merger talks with CSX had ended, Harrison disputed speculation that talks fell apart over fears U.S. regulators would not have approved such a deal.
 
Merging CSX with its concentration of tracks in the eastern United States would have allowed CP, which is Canada's second largest railway, to create an expanded transcontinental railroad, and boost shareholder value for both companys, he said.
 
Harrison argued a well-planned merger could work, and would alleviate some of the problems faced by railways and shippers, including delays and bottlenecks, especially at pinch points such as those around Chicago and Minneapolis-St. Paul.
 
"Hypothetically, we could have taken a lot of traffic that's going to the Chicago gateway and taken it over the lakes, and used the Buffalo or Albany gateway to carry traffic from western Canada going to the east coast or southeast," he said.
 
"I don't know when the timing is going to be right," he said, adding demand for rail services will continue to grow, not counting crude oil, which is "like a gold rush."
 
Add to that the resistance in some communities to infrastructure improvements and government pressure to run slower trains for safety reasons, both of which create challenges for the railroads.
 
"I am not obsessed with some transcontinental merger. This is not about me," he said, noting he is scheduled to exit as CEO in 2017.
 
"If some M&A (Merger & Acquisition) activity happens, the chances are I could be gone when these things are approved."
 
Discussions with CSX never reached a formal offer stage, Harrison said, saying only that CP reached out to CSX, asking if officials were interested in exploring opportunities.
 
He said there were three or four meetings.
 
"We felt like it was a huge opportunity."
 
A merger would enhance shareholder value for both companies, improve the service offerings, and alleviate certain logjams, he said.
 
"We were not rebuffed," he said.
 
"We had some fascinating conversations about the potential but it became evident that we saw the world a little differently, which is fine."
 
He added that "I will not in my role as CEO allow us to fall in love in some deal and cause some deterioration of shareholder value."
 
A spokesperson for CSX did not respond to a request for comment.
 
CP, which reported third-quarter earnings on Tuesday that slightly missed analysts' expectations, still expects to more than double profit over the next four years, in part by running longer and faster trains.
 
Net profit in the third quarter rose to $400 million, or $2.31 per diluted share, from $324 million, or $1.84 per share, in the third quarter of 2013.
 
The operating ratio, the industry measure of efficiency, improved 3.2 percentage points to 62.8 percent.
 
Harrison said he is not advocating specific mergers, adding that he hasn't had conversations with other railroad CEOs.
 
But he believes sticking with the status quo doesn't necessarily work.
 
"I'm not advocating. It's not my position. It's not my responsibility to say if there ought to be any mergers, or there ought to be three or four, if there ought to be two carriers," he said.
 
"That's for individual carriers and rails to make their own decisions."
 
He added that CP thought its route network with CSX was a good fit, but "I don't think it causes someone else to say, if they're going to do it, I'm going to do it, too."
 
He told analysts that he doesn't believe a hostile takeover would work, because co-operation is key.
 
"Mergers are difficult at best," Harrison said.
 
"There is only going to be one CEO, and there's only going to be one CFO. And you start to get social issues and egos and all those things involved, and sometimes those get in the way of shareholder value."
 
He conceded that chances of a merger with a U.S. western railroad was lower, adding the cost would be more expensive with railroads such as with Kansas City Southern.

Vanessa Lu.