The Surface Transportation Board has launched merger resources pages on its website just a day after Union Pacific and Norfolk Southern confirmed that they are engaged in advanced talks over a combination that would create the first U.S. transcontinental railroad.
UP (NYSE: UNP) and NS (NYSE: NSC) said their talks may not result in a deal.
The STB’s information includes a sample timeline that depicts how a Class I railroad merger application might flow through the regulatory review process. That process — from railroads notifying the board of their intent to merge to a review of the application and final decision — would play out over a 19- to 22-month period.
The timeline would be subject to change based on how long it takes to complete the required environmental review or any additional hearings the board may hold. The Canadian Pacific Kansas City (NYSE: CP) merger review took two full years.
The resources page includes merger regulations and the board’s 2001 decision that discusses its rationale for imposing higher standards on additional mergers involving the big Class I systems.
The old merger rules essentially encouraged mergers. The current regulations increase the burden on railroads by requiring them to show that their merger would be in the public interest and enhance competition rather than merely preserve it.
The 2001 rules, which were drawn up after rapid consolidation in the 1990s led to service problems in the aftermath of the Union Pacific-Southern Pacific merger and the CSX (NASDAQ: CSX) and Norfolk Southern split of Conrail, remain untested. And none of the major Class I systems have filed a merger application under the new rules.
The board’s review of the Canadian Pacific-Kansas City Southern merger was conducted under the old rules. Certain mergers involving KCS were exempt from the board’s 2001 rules.
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