According to the report, CSX turned down the takeover overture. But that didn't matter to Wall Street (and Bay Street up north.) Shares of CP were higher Monday as well.
In fact, the mere thought of a big railroad merger led investors to speculate about who else could get a buyout bid.
Shares of Norfolk Southern (NSC) and Kansas City Southern (KSU) were both up more than 3%. It looks like the market's theme song for today is "Train Kept A Rollin'." (No offense to Aerosmith fans ... or those who would prefer a video for "C'Mon Ride It (The Train)" by the Quad City DJ's -- but I have to go with the version by The Yardbirds.)
It seems that investors are betting that if CSX does wind up getting bought, Norfolk Southern or Kansas City Southern could be next -- and that Union Pacific or Canadian National could be potential buyers.
Another beneficiary of this train ride? Warren Buffett. Berkshire Hathaway (BRKA) (BRKB) is the parent company of big U.S. railroad Burlington Northern Santa Fe. Berkshire shares were also trading higher on Monday.
Buffett famously called the BSNF deal an "all-in wager" on the U.S. economy. Will the Oracle of Omaha push his significant stack of chips to the table again?
Probably not. Wall Street may be getting ahead of itself. The odds of a deal (or deals) happening anytime soon seem remote, according to Cowen & Company analyst Jason Seidl.
Seidl wrote in a report Monday that shippers are "disenchanted" with the railroad industry due to problems with service and capacity. Seidl cited a survey of shippers by Cowen that showed 70% of them are opposed to a major railroad merger.
Regulators probably won't be too thrilled either. Seidl notes that the number of major railroads has already shrunk from 40 to 7 since 1980.
Investors might be hoping that CP will continue to put pressure on CSX, however. And that argument does make some sense. CP's second-largest shareholder is Pershing Square Capital Management, the activist hedge fund run by Bill Ackman. But Ackman would likely have to make an investment in CSX for his voice to truly matter.
Consolidation in the railroad industry may very well happen one day. Kansas City Southern in particular has long been considered a logical takeover target because of its Mexican railroad business.
There still is no true transcontinental railroad. And with shale gas and oil increasingly becoming a more lucrative product for the railroads to transport as coal shipments decline, the chance to own a railroad that spans from East to West and from Canada to Mexico is obviously appealing.
In fact, the railroad industry's ties to the U.S. energy industry is one big reason why railroad stocks -- and the Dow Jones Transportation Average (DJT) -- have outperformed the market this year.
But investors piling into the stocks on Monday hoping for some big mergers may be making the wrong bet.
Billionaire investor Warren Buffett famously pointed out a few years ago that his secretary pays a higher federal income tax rate than he does.
That led to calls by President Obama for a proposed Buffett Rule, MOREPaul R. La Monica - Aug 26, 2014 12:22 PM ET
Let's play a game. Please look at the image above and sing the following tune. Apologies to Sesame Street purists ...
One of these bank stocks is not like the others. One of these bank stocks MOREPaul R. La Monica - May 20, 2014 1:23 PM ET
There was a healthy discussion about top Berkshire Hathaway subsidiaries and investments at the shareholder meeting Saturday afternoon once investors returned from lunch. Here are the top five highlights.
1. Pass the ketchup, please
Warren Buffett said that Heinz was a reasonably run food company before Berkshire (BRKA) (BRKB) teamed up with 3G Capital to buy the ketchup king. He noted that Heinz had pre-tax margins of 15%.
But Buffett added that he MOREPaul R. La Monica - May 3, 2014 4:18 PM ET
The Berkshire Hathaway annual shareholder meeting in Omaha on Saturday started as it always does ... with some good clean fun.
But investors grilled Berkshire CEO (BRKA) (BRKB) Warren Buffett and vice chairman Charlie Munger about Coca-Cola, President Obama and succession plans, among other issues, once the question and answer session started.
Buffett was mobbed by the media and investors on the exhibit hall floor as he chowed down on some Dairy Queen MOREPaul R. La Monica - May 3, 2014 12:44 PM ET
Four things were made quite clear at a cocktail reception for Berkshire Hathaway shareholders Friday night at the Borsheims jewelry store in Omaha.
1. Berkshire investors absolutely adore Warren Buffett. (And Charlie Munger too.)
2. Few worry about what will happen to Berkshire after Buffett retires or succumbs to the same fate that lies ahead for all of us.
3. Even fewer shareholders seem willing to entertain the thought of selling their Berkshire stock MORE
I'm going to Peyton Manning's favorite city this weekend. Omaha! Omaha!
Yup. Heading to the Berkshire Hathaway shareholder meeting. It should be a fun trip. And I expect to meet a lot of happy Warren Buffett MOREPaul R. La Monica - May 1, 2014 12:54 PM ET
If finance had a hall of fame, Warren Buffett, Carl Icahn, John Paulson, George Soros and Bill Ackman would probably be in it.
These men aren't just rich, they've managed to beat the market consistently.
Plenty of investors dream of being in their league, but decoding the market on your own is tough and buying into many of these famed investors' funds is steep.
While you can purchase a class B share of MOREHeather Long - Apr 2, 2014 10:51 AM ET
Billionaire investor Warren Buffett took his love of "Breaking Bad" to another level Sunday night during the season finale of the award-winning series.
The Oracle of Omaha tweeted a picture of himself as Heisenberg, the alter ego of former chemistry teacher Walter White turned crystal meth kingpin, along with the message "Not even the Oracle knows what will happen tonight. #waltsuccessor."
The tweet came two minutes into the final episode and was MOREHibah Yousuf - Sep 30, 2013 11:27 AM ET
Bond guru Bill Gross is wondering how investors will fare if the current economic recovery gets derailed.
"All of us, even the old guys like Buffett, Soros, Fuss, yeah -- me too, have cut our teeth during perhaps a most advantageous period of time, the most attractive epoch that an investor could experience," Gross, the founder and co-chief investment officer of Pimco, wrote in his monthly investor letter.
"What if a future epoch favors MOREMaureen Farrell - Apr 3, 2013 11:23 AM ET
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