Union Pacific will do all in its power to stop rail mergers- CEO

By Nick Carey
LOMBARD, Ill., Jan 13 (Reuters) - No. 1 U.S. railroad Union
Pacific Corp UNP.N believes major railroad mergers are not in
the interest of the rail industry or customers and is working
behind the scenes to make sure none take place, the company's
top executive said on Wednesday.
"We don't want Class I railroad mergers to happen," chief
executive Lance Fritz told Reuters when asked about Canadian
Pacific's CP.TO unsolicited bid for U.S. railroad Norfolk
Southern Corp NSC.N . "We'll do everything in our power to make
them not happen."
Fritz, who was in the Chicago suburb of Lombard to address a
meeting of the Midwest Association of Rail Shippers, said Union
Pacific has been talking to state and federal legislators across
its network, its customers and regulators including the Surface
Transportation Board about why mergers would be bad for
business.
"I think we're doing a fair job of helping them understand
our perspective," Fritz said. "I think (the chance of a merger
happening is) slim because I want it to be slim and we're
working hard to make it slim."
He said a merger would create problems in Chicago where all
major U.S. railroads interconnect and stressed a flurry of
mergers in the 1990s created huge service issues.
Union Pacific (N:UNP) has also talked to other major railroads about
the potential impact of a merger, though those conversations are
limited by law.
Canadian Pacific in mid-November disclosed its $28 billion
offer to buy Norfolk Southern (N:NSC).
Norfolk Southern has spurned the Canadian railroad's
interest, setting the scene for a potentially lengthy proxy
battle. A number of customers and legislators have written to
the Surface Transportation Board (STB) opposing the proposed
merger.
That opposition could significantly harm Canadian Pacific's
case if a merger reaches the STB for a review. Customers are
concerned a merger would lead to others among North America's
remaining railroads, resulting in an anti-competitive duopoly.
According to its own rules, the STB must consider the
potential for other mergers.
The No. 2 U.S. railroad BNSF, owned by Warren Buffett's
Berkshire Hathaway (N:BRKa) Inc BRKa.N , has said publicly if the STB
agrees to consider a Canadian Pacific and Norfolk Southern
merger, increasing the potential for a union, it could in turn
bid for Norfolk or No. 3 U.S. railroad CSX Corp CSX.O .
Fritz said a merger would "increase the pressure enormously"
on other railroads to consolidate, but declined to say what
action Union Pacific would take.
"We'll evaluate that should it occur and do the best thing
for our shareholders," he said.