00:00 Julie Hyman
The Railway World may be associated with a major merger, as Union Pacific confirms that the Norfolk Southern rival in negotiations is a transaction worth over $ 60 billion. Following approval, Ken Hexter from a securities transport analyst B has increased his Union Pacific Stock price to $ 271 compared to $ 262 and he joins us now. Kena, it’s good to see you.
00:26 Ken Hexter
Hey, good morning, Julie.
00:28 Julie Hyman
So why would it make sense to bring together these two railways? What when you talk about two railways, right? What synergies do you talk about especially because I don’t think it would mean less rail lines, right?
00:42 Ken Hexter
No, in this case it is not, right? In historical mergers, we saw that, in the 1980s, in the 90s, we saw a lot of coincidence units that contained Burlington’s northern Santa Fe or ups P. It would be a merger to the end, so you get a transcontinental you don’t have in the US. You have two in Canada, but we don’t drive from the shore to the US. It would be related to connection, and that, you know, efficiency. So when you ask what the benefit is, it’s customers, right? You can get, you don’t have to spend a day, a day and a half, sitting in the yard when you move from the eastern carrier, you can get a good solid flow.
01:26 Julie Hyman
And why, if that, I mean, it does it logical, right? Was it just not due to the reasons for regulatory, or were there other historical obstacles?
01:40 Ken Hexter
Well, there is nothing magical in the Mississippi River when it comes to how historical mergers have happened, but you know, this is what you have seen at first overlapping. Even you know, the Norfolk Southern and CSX divided Conrail in the late 90s. So you looked at the things you were overlapping and you could come to the investors and say, “We do it and we only increase our costs.” It’s about growth, you know how to win a business from trucks? You have better service and you continue to grow. So you are right, the regulatory authorities have already hesitated to allow them to be merged. 2000 There was a proposal to combine Burlington’s northern and Canadian national, one of the national Canadian railways. This is exactly what started a merger’s mortar. So STB said, “Wait a minute, we have just experienced a lot of merger. Let’s think about it.” And partly it was, you had to be for the benefit of society, for public interest, and you have to increase competition through merger. So what you have to go with. Well, is it just a railway race now, do we increase competition from trucks? Here’s what this administration is probably looking at this merger, and you are probably looking at how you make railways for more competitive industrialization and everything else that the administration wants to drive an internal basis.
03:38 Julie Hyman
So you think I have in mind how likely it is then, if they, you know, there are obviously a few IFS. If they actually agree on the agreement, do you think there would be that regulation approval?
04:00 Ken Hexter
Well, look, I think there were many opportunities when Jim Vena, CEO of Union Pacific, caused it. He made an article in mid -May, where the industry was discussed. At our conference, we had a STB chairman in mid -May. At our conference conversation conference we were Jim Vena. So before, there was a lot of talk about it, you know, we have reached this point where they now confirmed that they are in the debate. And I think it’s interesting because you haven’t heard the famous voice that crossed the top and say not at all. It will never happen. And I think that’s why you have each of these progressive discussions on continuing actions because, you know, it is preparing the market. But you know, see, we will definitely have the time when all the regulatory authorities, government agencies, senders and union will have their voice through the STB process to see what you say. What will be the result? Will it even be allowed to survive? Will there be things they will have to give up, whether it is the sale of the lines or the overlapping access to the network, what is called open access so that others can compete? So it will be interesting to see where it will appear in the spectrum. However, the debate is still ongoing. They noted that they are in advanced negotiations and we will see where he goes from.