As railroads barrel down merger track, a deal may start domino effect

January 11, 2016

As railroad companies seem to be barreling down merger track, any deal may start domino effect

Amid the loudest wave of railroad industry merger-and-acquisition talk since 2010, one question is: Where will Omaha figure in?Website Insert Start Here copy

Back in 2010, Omaha was at the center of the biggest deal to hit the railroad industry to that point, the acquisition of BNSF Railway by Warren Buffett’s Berkshire Hathaway Inc. for $44 billion.

This time around, many of the same pieces are in place: Berkshire Hathaway is still led by Buffett, based in Omaha. And it’s got a major stash of cash.

Also lurking is Omaha-based Union Pacific, the second-largest railroad behind BNSF by ton-miles hauled, and the one that forged Omaha’s historical link to the business when it formed during the Civil War to build a railroad west from the Missouri River, across Nebraska and over the Rocky Mountains.

A new round of consolidations might be the industry’s last. There are only seven Class I railroads operating in the United States, the class reserved for the largest freight haulers. Just before World War II, there were almost 150, and many lurched their way toward unprofitability after the war.

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