Al Root

President Donald Trump's penchant for firing federal employees might have repercussions for railroad mergers. Investors are already responding.

On Wednesday, the president fired Surface Transportation Board member Robert Primus. The White House told The Wall Street Journal that "Robert Primus did not align with the President's America First agenda," adding "the Administration intends to nominate new, more qualified members to the Surface Transportation Board in short order."

Primus plans to challenge the firing, the Journal reported.

The Surface Transportation Board is a federal agency that regulates railroads. It was created in 1996, replacing the Interstate Commerce Commission, which dated back to the 1800s, and has "jurisdiction over railroad rate, practice, and service issues and rail restructuring transactions, including mergers, line sales, line construction, and line abandonments."

The STB can have five board members. It currently lists four on its website; Primus is listed as a former board member. Primus, whom the Journal described as a Democrat, was the only member of the board to oppose the 2023 merger of Canadian Pacific and Kansas City Southern.

That is relevant today because railroad M&A, notoriously difficult to navigate past regulators, is heating up. In July, Union Pacific and Norfolk Southern announced plans to merge, creating a truly transcontinental railroad.

That deal was part of the reason activist investors Ancora recently urged CSX to look for a merger partner, suggesting either Berkshire Hathaway subsidiary BNSF or a Canadian railroad. Ancora portfolio manager Jim Chadwick told Barron's that CSX needs to act with more urgency, saying he believes the Trump administration would look favorably on mergers.

Union Pacific stock was up 0.2% in midday trading, while Norfolk Southern shares gained 1.8%. The S&P 500 was up 0.1% and the Dow Jones Industrial Average was down 0.2%.

Shares of CSX were up 0.2%, but stocks of the Canadian railways, seen as the potential buyers of the company, declined. Canadian Pacific Kansas City Southern stock was off 1.2% and Canadian National Railway shares fell 1.9%.

The Canadian railroads would likely need to pay a premium price for investors to agree to the sale, and shares of acquiring companies often fall in response to merger news. Investors may worry whether an acquirer will receive a high enough return to justify a lofty purchase price.

They may also seek to take advantage when an acquiring company uses stock to buy shares. That can create an arbitrage opportunity where investors buy the company being purchased and sell the acquirer's stock to lock in a spread.

Railroad mergers have worked in the past. Consolidation in the industry has led to stable prices and higher profit margins, but there hasn't been a major rail merger in more than 25 years. Kansas City Southern, acquired by Canadian Pacific, was a smaller railroad, and it had a special merger exemption from the STB.

It is still very early in the current railroad drama. Investors can count on more merger news in the coming months.

Write to Al Root at allen.root@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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August 28, 2025 12:54 ET (16:54 GMT)

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