Former CSX Corp. President and CEO Joe Hinrichs threw cold water on merger speculation surrounding the company in recent weeks, saying better cooperation between major North American railroads would improve freight service and financial performance.
However, a change at the top of Jacksonville-based CSX announced Sept. 29 is reviving optimism about a merger, analysts said.
CSX said Hinrichs left the company and was replaced by former Linde CEO Steve Angel.
“The company and Hinrichs have been under pressure to defend the strategy of pursuing partnerships over rail consolidation, so the change is not a complete surprise,” J.P. Morgan analyst Brian Ossenbeck said in a research note.
“However, the timing was unexpected considering the CSX network is performing extremely well and the teams are already formed in favor of consolidation and partnerships,” he said.
“The market response has been overwhelmingly positive on Angel’s operational track record, and as we noted 2 weeks ago, that sentiment was quickly turning positive on CSX,” Ossenbeck said.
CSX’s stock was up $1.41, or 4.2%, to $35.44 at 2:30 p.m. Sept. 29.
Angel was CEO of Praxair when it merged with Linde in 2018, and he became CEO of the combined company.
Analysts noted that his experience with a large merger could mean CSX is more amenable to a deal.
“We’d expect investors to see the appointment of Angel as an indication that M&A remains a possibility given his experience with Linde/Praxair,” Wells Fargo analyst Christian Wetherbee said in a research note.
“A key question we have regarding a potential BNSF/CSX merger is who would manage the integration of the combined company. Angel may be the answer,” he said.
Angel is 70 years old, according to a Securities and Exchange Commission filing by CSX on his employment agreement. Hinrichs is 59.
The filing did not say how long Angel’s term as CEO will be.
The terms of his agreement include CSX providing “corporate housing” in Jacksonville for him, the filing said.
Analysts did not focus on Angel’s age but praised his experience.
“Mr. Angel has a reputation as someone focused on capital allocation and operational execution, and is well-regarded for his leadership in executing/integrating the Linde/Praxair merger, a trait that we suspect will come in handy as CSX navigates rail consolidation,” BMO Capital Markets analyst Fadi Chamoun said in a note.
Linde retired as Linde CEO in 2022 but became chairman of its board. He plans to retire from the board in January, CSX said.
Linde is a global industrial gases and engineering company. But Angel’s 45-year career included 22 years at General Electric, which included working directly with locomotive and rail operations, CSX said.
Analysts think Angel’s operational experience will translate well into his position at CSX.
“Steve Angel’s experience running a large industrial gas business at Praxair and Linde likely brings a renewed focus on operations and execution at the CEO level, which is somewhat of a departure from Hinrich’s customer-first approach,” Wetherbee said.
“We do not think this transition changes the M&A outlook in the near term although having a new CEO with a proven track record of consolidation in a highly regulated industry could change BNSF’s perspective depending on how the current partnerships play out,” Ossenbeck said.
BNSF Railway is owned by Berkshire Hathaway and its chairman, Warren Buffett, said in an August interview with CNBC he was not interested in making a bid for CSX.
“We continue to see further rail M&A as optionality for CSX, but Angel increases confidence in the potential success of a deal,” Wetherbee said.