Thursday, November 19, 2015

Will Richmond Suffer if Norfolk Southern Railroad Merges?

Uncertainties cloud offer by Canadian Pacific.

Posted By on Thu, Nov 19, 2015 at 6:05 PM

What do recent exhibitions at the Virginia Museum of Fine Arts such as “The Art of the Flowers,” “Forbidden City” and “Rodin” have in common? All were funded in part by Norfolk Southern Corp., a major Norfolk-based railroad that's always had a large presence in the Richmond area.

But now, Norfolk Southern appears to be in a fight for its independence. And its ability to donate to area charities might be in jeopardy.

The railroad is lukewarm to a buyout offer by Canadian Pacific, a Calgary-based railroad that operates throughout Canada and in parts of the United States. Although it hasn’t made a formal offer, CP has suggested $46.72 and 0.348 percent of stock in the merged firm for each share of NS stock.

Norfolk Southern is lukewarm to the proposal, which faces significant regulatory issues. Its stock price is now trading considerably higher in the low $90 a share level.

CP made a play a little while ago for CSX, another major railroad in the area, but it got nowhere.

The problem is that a perpetual wave of mergers has been going on in the rail industry for at least a century. Essentially, the United States has two eastern carriers, Norfolk Southern and CSX -- and two in the west -- Burlington Northern Sante Fe and Union Pacific. This balance does offer some level of competition on rates.

There has long been speculation that Canada’s two rail lines -- CP and Canadian National -- might link with the four players in the eastern and western United States to create two lines stretching across North America.

Norfolk Southern has been hurt because its coal revenue has dropped 23 percent. Utilities are switching from coal to cleaner and cheap natural gas and the global market for metallurgical coal to make steel -- a big money maker for NS --- has weakened.

Canadian Pacific has been a major beneficiary of oil produced by fracking in the Far West and Rockies.

It's hard to say if CP would pay much attention to Richmond and its outlets such as VMFA if the merger goes through.

Although CSX rates in the top 50 of charity-minded companies as selected by Corporate Responsibility magazine, its involvement in Richmond seemed to weaken after former CSX head and former U.S. Treasury Secretary John Snow retired and CSX moved its headquarters form Richmond to Jacksonville, Florida, about 10 years ago.



Subscribe to this thread:

Add a comment

Connect with Style Weekly

Copyright © 2021 Style Weekly
Richmond's alternative for news, arts, culture and opinion
All rights reserved
Powered by Foundation