TO PLACE RAILROAD MERGERS in their historical perspective, it may be well to recall that for at least several decades prior to the passage of the 1958 Transportation Act the merger movement has been, stymied. As recently as the late 1920's, the Commission failed to approve the merger of the Chesapeake & Ohio, the Pere Marquette, the Erie and the Nickel Plate, and placed such restrictions on the then proposed Northern Pacific-Great Northern merger that the latter two carriers decided to go their separate ways. It was only in 1959, following the passage of the 1958 Transportation Act, itself the product of an improved political climate vis-a-vis the railroads, that the Commission approved its first post-war merger, one joining the Norfolk & Western and the Virginian. In 1960, the Commission approved the mergers of the Soo Line and the Wisconsin Central with the Duluth, South Shore and Atlantic; the Erie with the Lackawanna; and the Chicago & North Western with the Minneapolis & St. Louis. In 1962, the merger of the Pennsylvania with the Lehigh Valley was approved. In 1963, the proposed Nickel Plate-Norfolk & Western merger proposal obtained Examiner approval subject to certain modifications. Examiner approval was also obtained on proposals to merge the Santa Fe with the Western Pacific, the Missouri Pacific with the Chicago & Eastern Illinois, and most importantly, full Commission approval was obtained on the important Seaboard-Coast Line merger. In 1964, the rail merger movement continued the pattern of previous years. The I.C.C. gave final approval to the Norfolk & Western-Nickel Plate merger, including leasing of the Wabash and of the Pittsburgh & West Virginia and the purchase of the Akron, Canton & Youngstown. This merger also included a plan for the divestiture of Pennsylvania's holdings of Norfolk & Western stock. Also, Mr. Murphy, an I.C.C. Examiner, recommended that three railroads, the Great Northern, the Northern Pacific, and the Burlington, be merged into one system. The next legal step will be full Commission approval which could be obtained before midyear. Only a fortnight ago Examiner Murphy was the subject of strong denunciation by the Department of Justice. The objections raised by this body may well prove academic in the light of the Commission's legal power to overrule such objections. The year 1964 was also marked by an agreement of the Chicago and North Western to merge with both the Milwaukee and the Chicago Great Western and by a bitter struggle for control of the Rock Island by both the Union Pacific and the Chicago and North Western. While the first round of this latter contest has been won by the Union Pacific, it must be remembered that the final merger determinant is the Commission itself. The Commission, and the Commission alone, is the sole authority which in the public interest can decide where control of the Rock Island may ultimately rest. A number of other hearings, court proceedings, and negotiations, were carried on last year, most important of which were those involving the possible merger of the Frisco with the Santa Fe. At the same time, Santa FeMissouri Pacific talks were suspended in part owing to the need of simplification of MOP's complex capital structure. It may well be that as the merger pattern develops that there will be but three important systems in the East, two in the South, and possibly six in the West, with the smaller roads-usually those weak financially -being absorbed through stock control rather than through actual merger. A possible example is the method by which the C&O obtained Commission approval to control rather than merge with the B&O. Completion of all of these proposed railroad mergers should, within five years following consummation, increase railroad earnings by some $350 million annually, the importance of which may be measured by comparing such a sum with Class 1 pre-tax earnings of $815 million in 1963, and around $885 million in 1964. Most important factors to emphasize in 1964 is that merger progress was quite marked despite election year uncertainties and the appointment of several I.C.C. Commissioners, and that no untoward developments occurred, other than interminable legal delays. Even in the face of a sharp technical reaction late in the year, Dr. Pierre R. Bretey, Senior Vice President of Hayden, Stone & Co., Inc., is Editor Emeritus of the Financial Analysts Journal. He is a leading Wall Street Railroad Analyst, and past president of the New York Society of Security Analysts and the Financial Analysts Federation.