CN, BN call off merger

MONTREAL (July 20, 2000) — Canadian National Railway Co. and Burlington Northern Santa Fe Corp. killed their merger plans yesterday, saying that a U.S. moratorium on big rail mergers would have delayed their combination until late 2002.

“It is not in the interests of our shareholders to assume the risks involved in waiting up to 2-1/2 years for a decision on our transaction by the regulator in the United States,” CN president and chief executive Paul Tellier and BNSF chairman and chief executive Robert Krebs said in a joint statement.

The U.S. Surface Transportation Board (STB) imposed a 15-month moratorium on rail mergers last March, giving it time to create new guidelines for consolidation in the industry. Last week, an appeals court rejected an appeal by CN and BNSF to strike down the moratorium.

The companies said the moratorium prevents them from filing a common control application with the STB until at least June 2001, making a regulatory decision on the merger unlikely before October 2002.

CN and BNSF announced plans last December to create North America’s largest rail network, with 80,000 kilometres of routes across Canada, south to New Orleans on the Gulf of Mexico, and west to the U.S. Pacific coast.

The STB said it wanted to develop new rules in light of congestion created by past consolidation. In the East, CSX Corp. and Norfolk Southern Corp. are still experiencing service difficulties more than a year after they divided Conrail Inc.

Burlington Northern operates 33,500 miles of track in 28 states and two Canadian provinces. Canadian National spans Canada from British Columbia to Nova Scotia and also operates in the U.S. South and Midwest, including New Orleans, St. Louis, Chicago and Detroit.