BNSF: New UP-CN deal ‘undermines’ case for merger

Thursday.

CN (NYSE: CNI) on Wednesday said that it won’t oppose the merger in exchange for better access to the U.S. Midwest and Mexico. UP (NYSE UNP) also gets operating rights to CN’s route around Chicago to the East Coast.

BNSF said that the agreement actually underscores the benefits of traditional rail link-ups UP has said it can’t achieve without a merger.

“UP’s agreement with CN undermines one of the core arguments for the merger,” Andersen said. “For a year, UP has claimed that partnerships cannot deliver the benefits it says this transaction would create. Yet the CN agreement closely resembles partnerships that BNSF and other Class I railroads have successfully operated for decades.”

Opponents of UP-NS say it fails to meet the Surface Transportation Board’s rules that require a merger to enhance competition.

“UP is required to demonstrate that the benefits it claims can only be achieved through a merger. Its own agreement with CN shows the opposite,” Andersen said. “The benefits UP highlights can be pursued today without a merger, and significant portions of the arrangement are not even contingent on merger approval.”

The deal also led some observers to speculate that the the CN agreement could be the first in a series of compromises negotiated by UP with large shippers and other stakeholders to swing more support for the merger.

Evaluation of the merger won’t start until UP and NS file additional information requested bv the STB by July 27.

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