CSX Shares Derail as Buffett Rules Out Railroad Takeover
Warren Buffett's declaration that Berkshire Hathaway will not acquire a railroad sends CSX stock down over 5%, erasing merger speculation.
Shares of CSX Corporation (NASDAQ: CSX) plunged more than 5% in heavy trading after Warren Buffett, the influential chairman of Berkshire Hathaway, definitively ruled out an acquisition of the railroad. The announcement put an abrupt end to market speculation that Berkshire's own BNSF Railway would purchase CSX as a strategic response to a potential mega-merger elsewhere in the sector.
Buffett's comments, made in a CNBC interview, removed a significant speculative premium that had been supporting the stock. He stated that Berkshire is "not in the market to buy a train company" and that a bid for CSX or its competitors was "not in the cards." The news triggered a sell-off, with trading volume in CSX shares surging to 3.5 times its daily average.
The decision followed an August 3 meeting between Buffett and CSX CEO Joe Hinrichs. Instead of a costly and complex merger, Buffett revealed that Berkshire's BNSF Railway would pursue deeper operational ties and "growth synergies" with CSX. Following the announcement, the two companies confirmed plans to expand their interline intermodal services, aiming to improve connections between the West Coast and major East Coast ports.
This clarification on strategy comes in the wake of Union Pacific's proposed $85 billion acquisition of Norfolk Southern, a deal that would create the first U.S. transcontinental railroad. Analysts and investors had widely anticipated that BNSF would counter by acquiring CSX. Buffett’s statement upended those expectations, sending ripples across the industry, with shares of Union Pacific and Norfolk Southern also declining on the news.
While the door on a merger appears closed for now, some analysts suggest this may not be the final word. Independent analyst Anthony B. Hatch noted that if the Union Pacific-Norfolk Southern deal proceeds under the Surface Transportation Board's stringent 2001 review rules, BNSF and CSX could later argue that a merger of their own is necessary to maintain a competitive balance in the North American rail landscape.