If Canadian Pacific Railway Ltd. pursues its ambition to hook up with a U.S. railway, it has a secret weapon.
The Calgary-based company's board of directors includes Linda Morgan, a respected U.S. railway lawyer and, more importantly, the former chairman of the United States Surface Transportation Board.
Ms. Morgan, who was appointed to CP's board in 2006, was in charge of the regulator in 1999, when Canadian National Railway Co. and Burlington Northern Sante Fe Railway announced plans to merge. After outraged shippers complained rail service had yet to recover from earlier mergers, the STB effectively ordered a freeze on any large takeovers, and the CN-BNSF dream died.
As the author of that moratorium, Ms Morgan likely knows better than anyone what it will take to get today's STB to approve a rail merger, Bart Demosky, CP's chief financial officer, said at an investor conference in New York on Wednesday. "She wrote the rules. I think if there's anyone who knows the intent better than her, I'd like to meet that person," he said.
But as soaring volumes of oil, grain and other freight clog North American railroads, it's not clear whether shippers, or the U.S. regulator, are open to the prospect of railway mergers. Rail shippers are unhappy, as are farmers and others who rely on the rails to get their goods to markets. And after the failed CN-BNSF marriage, the STB tweaked the merger rules to say they must enhance competition, not merely preserve it.
Hunter Harrison, CP's chief executive officer, has said he is confident he can make the case – that a merger between his railway and a company with a network of eastern rails will ease bottlenecks and offer speedier routes around Chicago and other choke-points.
CEOs of other railways have said they doubt the regulator is in any mood to take a chance on mergers amid all the congestion. But they don't have Ms. Morgan on their side.