Buffett: Berkshire will not bid for CSX or Norfolk Southern

OMAHA, Neb. — BNSF Railway wants to date CSX — but has no interest in getting married.

Five days after Union Pacific announced its $85 billion deal to acquire Norfolk Southern, Berkshire Hathaway Chairman Warren Buffett and CEO designate Greg Abel told CSX CEO Joe Hinrichs that they would not bid for the Eastern railroad.

Rather, Buffett told CNBC in an interview today, Berkshire believes that its BNSF Railway should forge closer ties with CSX to gain growth synergies without the expense and regulatory risk of a merger.

Buffett also told CNBC that Berkshire would not launch a competing bid for Norfolk Southern.

CSX stock fell 5% after the cable network’s report. Wall Street analysts and industry observers have expected that BNSF would seek to acquire CSX as a competitive response to the UP-NS merger.

Buffett and Abel met with Hinrichs on Aug. 3 in Omaha, Berkshire’s hometown. The Omaha-based UP and NS on July 29 announced their deal to create the first U.S. transcontinental railroad.

BNSF and CSX on Friday said that they would launch more interline intermodal service linking California and the Southwest with points on CSX in the Southeast. The railroads also will offer international intermodal service connecting Kansas City with the ports of New York/New Jersey and Virginia.

Earlier this year — amid merger talk from UP CEO Jim Vena — BNSF said it did not see the catalyst for a megamerger involving Class I railroads.

“For a merger to happen in today’s environment, our customers, policymakers, and the communities we serve would need to indicate that they want to see additional mergers,” BNSF spokesman Zak Andersen said in May. “We view it as unlikely as we aren’t hearing from our customers or the other constituencies that they want to see further consolidation in the industry at this point in time.”

Until Buffett’s remarks today, neither BNSF nor Berkshire had commented on the UP-NS deal.

The UP-NS merger will be the first to be judged under the Surface Transportation Board’s tougher 2001 review rules, which require the combining Class I railroads to enhance competition and be in the public interest.

The railroads expect to file their merger application by the end of January, although Vena says he would like to see it filed by early November.

Independent rail analyst Anthony B. Hatch says it’s conceivable that this is not Berkshire Hathaway’s last word on mergers.

BNSF and CSX could seek to win concessions as part of the UP-NS merger review process, he says. If the STB approves the deal, BNSF and CSX could then turn around and argue that they need to merge, too, Hatch says.

Note: Updated at 3:09 p.m. Central with comment from Anthony B. Hatch.