House Transportation Committee chair skeptical of rail merger offers

The chair of the House Transportation and Infrastructure Committee panned competing efforts by two Canadian railways to acquire Kansas City Southern (NYSE: KSU), saying the offers threaten to usher in a new round of consolidations in the rail sector.

In a Friday statement, Rep. Peter DeFazio, D-Oregon, said, “Multiple railroads are now seeking to acquire KCS, and that flurry should set off alarm bells about a potential new wave of railroad mergers that stifle competition and trigger industry-wide consolidation. We’ve been here before.”

DeFazio is referring to the efforts by Canadian Pacific (NYSE: CP) and CN (NYSE: CNI)  to acquire Kansas City Southern (KCS). Last month, CP announced its its plans and then this past Tuesday, rival railway CN said it would seek to acquire KCS. For both combinations, the end result would be a railroad that stretches coast to coast across Canada and then south to the U.S. and Mexico. Both combinations also need to undergo a review by the Surface Transportation Board. 

DeFazio continued, “In 1980, there were 33 Class I railroads. Today there are seven, and a merger between KCS and Canadian National or Canadian Pacific would leave only six. A series of mergers will likely result in a significant reduction of the railroad workforce, a workforce that has lost tens of thousands of jobs since 2015, and will negatively impact the rail network’s ability to provide affordable and reliable access for our nation’s shippers. Wall Street will make money from railroad consolidation, but the U.S. economy and workforce will be worse off for it.”