Canadian Pacific Railway has ended talks with U.S. counterpart CSX about a possible combination and plans no more discussions.
The railway operator did not say on Monday why it ended talks, but it did note in a brief statement that regulatory concerns appear to be a major deterrent for railroads considering combinations.
A CSX spokeswoman declined to comment on Canadian Pacific's statement.
Several reports had surfaced recently that CSX Corp. had rejected a merger offer from Canadian Pacific Railway Ltd. Both railroads declined to comment on the deal talk, but CSX CEO Michael Ward did say last week that the Surface Transportation Board, which regulates freight rail prices, would likely take a cautious approach to consolidation because there are only six Class I railroads in the U.S. and Canada.
Jacksonville, Florida-based CSX Corp. operates more than 21,000 miles of track in 23 Eastern states and two Canadian provinces. Other large railroads include Norfolk Southern, Union Pacific, BNSF and Canadian National.
Ward also said last week that past railroad mergers in the 1990s lead to poorer service after the deals as the companies worked to integrate the different railroads.
Canadian Pacific said Monday that it believed that regulatory approvals would be achievable for the right deal.
Railroad lobbyists have told Congress that the industry is struggling to keep up with a sharp increase in freight rail demand created in part by an oil fracking boom and two years of unusually bountiful harvests. Shippers have complained that widespread delays in freight rail shipments are hurting an array of industries.
Canadian Pacific said that a "pro-competition, customer-friendly" railway combination that also focuses on safety is a solution that could not be ignored on its merits by regulators. The railroad operator added that the industry's significant problems "will only worsen over time if solutions aren't put in place immediately."
CSX shares fell 2.9 percent, or 99 cents, to $32.87 in midday trading Monday while broader indexes were nearly flat. The stock had climbed about 18 percent so far this year, as of Friday's close, while the Standard & Poor's 500 index rose about 2 percent.
U.S.-traded shares of Canadian Pacific dropped $1.06 to $198.44.
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AP Business Writer Josh Funk contributed to this report from Omaha, Nebraska.
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