Al Root

Railroad merger hype is rising, and Ancora wants to hop on that train.

On Tuesday, the activist investor and hedge fund released a letter it sent on Aug. 6 to CSX, which demanded the railroad's management pursue merger talks with the Berkshire Hathaway-owned BNSF Railway and the Alberta-based Canadian Pacific Kansas City.

"The Board needs to announce in the near term that it is working with identified third-party advisors to explore a range of merger options," Ancora wrote. Failure to do so, it added, "risks impairing the long-term value of CSX."

Ancora and CSX didn't immediately respond to a Barron's request for comment on Wednesday.

It's a great idea -- that everyone already shares. The letter comes weeks after Norfolk Southern and Union Pacific announced merger plans that could create a truly transcontinental U.S. railroad. Any railroad merger faces stiff regulatory hurdles, but if the Union-Norfolk merger is approved by U.S. government agencies, Wall Street thinks that CSX would be next on the list to be courted by either BNSF or a large Canadian railroad.

In theory, expansion would allow any railroad to operate more efficiently, make it a stronger competitor to rivals, and reduce shipping costs for customers.

BNSF looks like the better bet. "For plainly obvious reasons, we don't think President Trump would allow a Canadian railroad to buy CSX," wrote Gordon Haskett analyst Don Bilson on Wednesday. "We have said so before. Nor do we think Ancora's CSX-CP reverse merger idea is sure to fly in Canada."

The "Ancora letter to CSX strikes us as unnecessarily aggressive, possibly counterproductive," wrote Citi analyst Ariel Rosa in a Tuesday report, adding some of Ancora's claims of anemic returns are "difficult to reconcile with reality." Rosa points out that CSX is tied for the best share price performance among large railroads since CEO Joseph Hinrichs joined the company in 2022.

Coming into Wednesday trading, CSX stock was up roughly 50% over the past five years, trailing the S&P 500 by roughly 40 percentage points. But shippers have had a tough time in the post-Covid environment. Union Pacific stock was up about 20% over the same span, while shares of UPS stock were down almost 50%.

It's not the first time Ancora has made waves: the activist inserted itself into the deal between U.S. Steel and Nippon long after the merger was announced. Initially, Ancora demanded a new U.S. Steel CEO and the abandonment of the Nippon deal to help "make U.S. Steel Great Again."

After much political wrangling, Nippon was allowed to buy U.S. Steel, with the deal closing earlier this year. Eventually, Ancora came to support the merger that U.S. Steel management initially recommended.

CSX stock was up 0.5% in early trading Wednesday at $36.70 a share, while the S&P 500 and Dow Jones Industrial Average were down 0.3% and up 0.1%, respectively.

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

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August 20, 2025 10:20 ET (14:20 GMT)

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