North America - The railway controlled by Warren Buffett's Berkshire Hathaway Inc. vowed to join any consolidation in the North American industry, saying that Canadian Pacific Railway's (CP) US$27 billion bid for a U.S. rival inevitably would trigger more deals.
 
Burlington Northern Santa Fe (BNSF) Railway executive chairman Matt Rose is open to making a competing offer for Norfolk Southern (NS), the company targeted by CP, and CSX Corporation (CSX) also would be "very much in play".
 
While BNSF doesn't favour fresh deal-making, the carrier won't be sidelined if any occurs, Rose said Thursday in a telephone interview.
 
"We've never in this industry just done one merger," said Rose, 56, who moved into his current post in 2014 after serving as chief executive officer since 2002.
 
"You do a merger and then somebody else announces it because of this issue of stabilization of the industry and parity in various markets."
 
BNSF's willingness to pursue a tie-up underscores the potential challenge for the U.S. Surface Transportation Board (STB), which would have to evaluate any deal.
 
There have been no major U.S. rail mergers for more than 15 years, and the STB has new, untested, rules requiring that it evaluate possible follow-on combinations as part of its regulatory review.
 
CSX and NS both were bright spots for the U.S. stock market, as most equities fell.
 
CSX rose 2.9 percent to $25.41 at 12:34 in New York, while NS gained 1.4 percent to $88.91.
 
NS has snubbed CP, which wants to create a cross-border, coast-to-coast, carrier in a North American industry dominated by six railways, NS and CSX compete east of the Mississippi, Calgary-based CP vies with Canadian National Railway (CN), and BNSF goes head to head with Union Pacific (UP) in the western U.S.
 
Tony Hatch, a former Wall Street analyst who tracked many of the 1990s mergers that created the modern industry, said Rose's comments were intended to slow down any rush to a round of deals that would shrink the industry's ranks.
 
"We're at this stage where everybody is saying, look, if this happens, it's going to be kind of a big thing and not necessarily a good thing," said Hatch, who now runs ABH Consulting.
 
"Matt's move is a warning in order to prevent that."
 
Spokesmen for NS, CP and CSX declined to comment on Rose's remarks, while UP's Aaron Hunt said, "We oppose rail industry mergers in the current environment and believe the regulatory hurdles for future consolidation would be significant."
 
Putting CP together with NS would leave Jacksonville, Florida-based CSX at a disadvantage, inevitably making that railway a target as well, Rose said.
 
CP sees $1.8 billion in merger benefits from a NS deal, which "quite frankly creates an uneven, unstable, railroad network with CSX," he said.
 
"Then you've got two railroads in the west that would be looking at, should one of us jump in with the NS assets or should the other one jump in on the CSX assets?" Rose said.
 
A BNSF offer for Norfolk, Va.-based NS would be akin to Union Pacific's efforts to step in during the 1990s to "provide a competitive bid when the Burlington Northern (BN) and Santa Fe (ATSF) were merging," Rose said.
 
"If there is consolidation to be had, we would participate as well."
 
Buffett completed his purchase of Fort Worth, Texas-based BNSF in 2010, a transaction valued at about $34 billion that he described as a bet on the U.S. economy because of railways' vital role in moving freight.
 
BNSF could bring considerable resources to bear in future consolidation.
 
Omaha, Nebraska-based Berkshire had more than $66-billion in cash at the end of the third quarter.
 
While there haven't been any combinations among major North American carriers in the 21st century, BNSF does "scenario planning every year," Rose said.
 
Rose said shippers don't support large deals.
 
They are concerned about having fewer options and the railways having too much market power, he said.
 
"I just don't get a sense that the marketplace wants to see a final consolidation," Rose said.
 
"The marketplace would tell you that they're already concerned that there's too much consolidation."
 
Thomas Black.