Buffett shoots down talk of Berkshire railroad merger

Billionaire investor Warren Buffett on Monday shut down speculation of a blockbuster railroad merger, saying his company Berkshire Hathaway is not looking to buy another train company.

Shares of CSX fell 5% on Monday after Buffett told CNBC he was not interested in a merger, dousing investor hopes that Berkshire's rail unit BNSF would acquire the rival railroad operator. A representative for Berkshire later confirmed Buffett's remarks.

For weeks, investors have speculated that CSX Corp and BNSF might pursue a merger. Last month, rivals Union Pacific and Norfolk Southern - the two other U.S.-based railroad giants - unveiled a surprise $85 billion merger proposal to create the first coast-to-coast freight rail operator in the U.S.

Buffett did meet with the CEO of CSX, but to discuss greater cooperation between the two companies, he told CNBC’s Becky Quick on Monday.

Buffett and Berkshire's future CEO Greg Abel met with CSX CEO Joseph Hinrichs in Omaha on Aug. 3 in Buffett's office without any advisors present, according to Berkshire. They made clear to Hinrichs that they would not make a bid for CSX, but believed they could cooperate more and gain some of the same benefits.

Last Friday, CSX and BNSF announced new coast-to-coast services, strengthening their freight connectivity but tempering market expectations of a merger.

CSX said in a note that its board and management team are exploring opportunities to enhance shareholder value, drive profitable growth and provide industry-leading customer service, as illustrated by the Intermodal Service Agreement with BNSF announced last week. CSX said it is also exploring ways to efficiently improve transcontinental service.

BNSF declined to comment.

The news puts pressure on CSX CEO Hinrichs, with investors unsatisfied with the company's performance.

Ancora Holdings, activist investors who recently increased their stake in the railroad, has urged the board to explore merger options with BNSF or Canadian Pacific Kansas City. It warned that CSX should not rely solely on Buffett's BNSF as a potential partner.