CSX Faces Mounting Pressure to Pursue Railroad Merger. An Activist Steps In.

A CSX train leaves a rail terminal in Nashville, Tenn. (Liam Kennedy/Bloomberg)

Less than three weeks after rival railroad companies Norfolk Southern and Union Pacific announced plans to merge, another large operator faces increased pressure to expand through a merger of its own.

Activist investor and hedge fund Ancora is demanding that CSX , which operates more than 20,000 miles of track, should pursue merger talks with Berkshire Hathaway-owned BNSF Railway and the Alberta-based Canadian Pacific Kansas City Limited.

“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 in a letter dated Aug. 6 but released publicly today. Failure to do so, “risks impairing the long-term value of CSX.”

BNSF currently manages 32,500 miles of rail track across the U.S. and Canada, while Canadian Pacific operates some 20,000 miles of track.

“CSX welcomes all opportunities for us to enhance value for our shareholders,” a company spokesman told Barron’s. “CSX appreciates the input of its shareholders and engages regularly with them as it executes on its goals to drive value through profitable growth and industry leading customer service.”

Norfolk Southern and Union Pacific announced their merger plans on July 29, calling the resulting network spanning 43 states and 50,000 miles “America’s First Transcontinental Railroad.” The deal will likely face tough regulatory scrutiny.

But the deal immediately put CSX in the spotlight, as investors and analysts speculated about whether it would make a countermove.

While CSX hasn’t announced any specific merger talks, CEO Joseph Hinrichs said during the company’s earnings call in July that “there are all kinds of opportunities” related to a possible merger and that the company was “open to talking about all those possibilities.”

CSX stock is up 13% year to date, versus Norfolk Southern’s 21% increase. CSX rose 1.4% Tuesday to $36.49 a share.

Write to Anita Hamilton at anita.hamilton@barrons.com