CSX/BNSF partnership not a replacement for deal between rails - analyst

[A railroad employee holding a walkie-talkie leans out from a CSX railroad locomotive,]

A partnership between CSX Corp. (NASDAQ:CSX [https://seekingalpha.com/symbol/CSX]) and Berkshire Hathaways' (NYSE:BRK.B [https://seekingalpha.com/symbol/BRK.B]) BNSF isn't a replacement for an eventual combination of the two railroads, according to an Evercore ISI analyst.

"New service collaborations do not have to be mutually exclusive with an eventual merger," Evercore analyst Jonathan Chappell wrote in a note on Friday. "In fact, a successful integration of the new services could end up being a precursor to a deeper end-game collaboration between the two rails. We view the announcement today as confirmation that BNSF and CSX will wait to see how the UNP/NSC regulatory path unfolds from here."

The announcement comes as investors have been pressuring CSX (NASDAQ:CSX [https://seekingalpha.com/symbol/CSX]) to do a deal with BNSF so the railroads can effectively compete with a combined Union Pacific (UNP [https://seekingalpha.com/symbol/UNP]) and Norfolk Southern (NSC [https://seekingalpha.com/symbol/NSC]). Ancora is pressuring CSX [https://seekingalpha.com/news/4487138-ancora-adds-pressure-on-csx-to-pursue-a-merger---report] to explore a merger with either Berkshire Hathaway-owned BNSF or Canadian Pacific Kansas City Southern (CP [https://seekingalpha.com/symbol/CP]) and kick-start the process by engaging an investment bank. Failing that, the activist investor is prepared to mount a proxy fight for board seats with the ultimate aim of ousting CEO Joe Hinrichs.

Under the partnership [https://seekingalpha.com/news/4488388-csx-bnsf-expand-intermodal-partnership-but-have-no-plans-to-merge]announced on Friday, the two railroad operators will begin a new service between Phoenix, Arizona, and Atlanta Georgia, aiming to convert over-the-road (OTR) freight to rail, as well as a new direct international intermodal service between the Port of New York and New Jersey, and Norfolk, Virginia, and Kansas City.

Shares of CSX fell 3.4% on Friday in the wake of the partnership news, though it appears investors may be overreacting.

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* CSX, BNSF expand intermodal partnership - update [https://seekingalpha.com/news/4488388-csx-bnsf-expand-intermodal-partnership-but-have-no-plans-to-merge]
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