Rail merger moratorium upheld DALLAS -- A federal appeals court on Friday upheld a government moratorium on rail mergers, dealing a blow to Fort Worth-based Burlington Northern Santa Fe Corp.'s plans to merge with Canadian National Railway Co., reported a wire service The U.S. Court of Appeals in Washington ruled 2-1 that the Surface Transportation Board was within its rights when it imposed the moratorium in March after shippers complained about poor service resulting from recent rail mergers. The board's decision froze the Burlington Northern-Canadian National deal, worth $6.2 billion when it was announced in December. The two railroads want to combine to form the largest railroad in North America, with 50,000 miles of track spanning 33 Western and Central states and eight Canadian provinces. In a statement, the companies said they were disappointed by the ruling but declined to say how they would react - or whether they would scuttle the merger. Burlington Northern chairman and chief executive Robert D. Krebs and Canadian National president and chief executive Paul M. Tellier said each company's management ``will discuss the ruling's implications for their proposed business combination, and each will consult its respective board of directors. "Neither BNSF nor CN will speculate about its options," they said. In March, Krebs said the moratorium would effectively stop the merger without giving it proper review. Calls for a moratorium grew out of Union Pacific Corp.'s 1996 acquisition of Southern Pacific Rail Corp., which led to huge bottlenecks in Texas and other states, and the 1999 splitting of Conrail Inc. between Norfolk Southern Corp. and CSX Corp., which led to delays in the East. In setting the moratorium, the Surface Transportation Board said it needed 15 months to study its standards for reviewing mergers and determine whether the standards should be changed. The board argued that allowing the Burlington Northern-Canadian National deal to go forward would have prompted other mergers, causing more congestion and poor service for shippers. Judge Douglas Ginsburg, writing the court's majority decision, said the board "neither violated the statute nor otherwise exceeded its authority by imposing the moratorium." Judge David Sentelle disagreed, saying the board hadn't acted quickly enough and had exceeded the power given it by Congress when it approved the moratorium. In afternoon trading Friday, Burlington Northern shares rose 56.25 cents to $26.813, and Canadian National shares rose 18.75 cents to $30.25. (Next Story)

Back to News Flash!

July 17, 2000
bentley@ble.org