On December 20 Canadian National and Burlington Northern Santa Fe announced plans to merge, creating the largest railway in North America. The two companies have over 80000 route-km and employ 67000 staff. Combined turnover is approximately US$12·5bn. Based on the closing prices on December 17, the two companies had an equity capitalisation of approximately US$19bn.

The merger will be structured through the creation of a new Canadian company, North American Railways Inc, which will be the ’parent company’ for BNSF and a ’companion company’ to CN. NAR and CN voting shares will trade as paired units, with shareholders getting one unit per BNSF share and 1·05 units per CN share. This will give the shareholders of each company equal voting and ownership interests. Under the CN Commercialisation Act, no single shareholder will be allowed to own more than 15% of NAR or CN voting shares.

CN and NAR will have their head office in Montréal, although BNSF’s operating headquarters will remain in Fort Worth. The two railways plan to lodge formal proposals by June, and hope to complete the merger by mid-2001, subject to regulatory approval.

Surface Transportation Board Chairman Linda Morgan said she was ’surprised by the timing of this proposal’. On December 28, the STB announced that the merger would be classified as a ’major transaction’, which would be subjected to a more extensive examination than the UP-SP, Conrail and CN-IC mergers. As part of this, the STB will be looking at the wider effects of the merger on the long-term future of the entire North American railway industry.