Big Guns Draw Up Battle Lines Over Merger - proposed merger of Burlington Northern Santa Fe and Canadian National - Brief Article

International Railway Journal, May, 2000

BURLINGTON Northern Santa Fe (BNSF) has launched a legal battle to overturn the decision by the US Surface Transportation Board (STB) to halt its proposed merger with Canadian National (CN) for 15 months while STB draws up new rules to prevent what it describes as "service disruptions associated with the previous round of mergers."

BNSF has appealed to the US Court of Appeals for a stay of STB's order, stating that a review would enable it to justify the merger, and claiming that any delay to the process could cause it "irreparable injury."

Mr Robert Krebs, chairman and CEO of BNSF, said: "It is inexplicable that STB believes it has the extraordinary power to block the filing of our application, yet believes itself powerless to block the merger of applicants who could not implement a merger effectively without creating a service crisis. The Board's decision is illegal and in clear violation of the ICC Termination Act.

"STB should not be permitted to stop a good merger in its tracks because of concerns about bad mergers in the past. And our competitors should stop frightening shippers with threats that, if our combination is not halted, they will carry out their own ill-considered mergers, once again saddling their customers, and ours, with service crises and breakdowns."

The war of words is likely to continue unabated. However, STB is standing firmly by its controversial decision which was made in mid-March. It has denied BNSF's claim that the enforced 15-month moratorium is illegal, and, meanwhile, has issued an advance notice of proposed rule changes, outlining those areas of existing merger regulations which it believes need to be reviewed.

The proposed merger has created a huge rift in the industry, highlighted by the four-day hearing which preceded STB's ruling. More than 150 people gave views and evidence, and the top managers of other US railways were not slow to condemn the plan.

Among them, Mr John Snow, chairman and CEO of CSX, warned that the railways are already "plagued with instability," and that "congestion and delays have shaken customer confidence." Mr David Goode, president and CEO of Norfolk Southern, added: "A major merger like BNSF-CN could disrupt the entire industry for years. I will not stand idly by and let them drain revenues from my system. Neither would others."

The battle lines are clearly drawn. But, for the moment at least, it looks as if STB has sufficient legal firepower to keep the peace and retain control over the industry.