CP Rail criticizes Norfolk Southern's assumptions about proposed rail merger

OMAHA, Neb. -- Canadian Pacific said Tuesday that getting regulatory approval for its proposed multi-billion-dollar purchase of Norfolk Southern shouldn't be a problem.

See Full Article

Norfolk Southern has rejected two cash-and-stock offers from the Canadian railroad, saying regulators wouldn't approve the deal and investors would be better off if the Norfolk, Virginia, railroad remained independent.

The deal's value is also contested. Norfolk Southern estimates the latest offer from Canadian Pacific at roughly $27 billion, and says it's inadequate; Canadian Pacific says it's between $37 billion and $42 billion based on the projected value of stock in a new company that would own both railroads.

The role federal regulators might play in a railroad merger like this is the subject of much speculation because no major railroad deals have been approved since the rules were toughened in 2001.

In a report issued last week, Norfolk Southern had consulted two former STB commissioners who predicted that concerns about competition and the structure of the proposal would doom this deal.

Norfolk Southern has said it believes the way Canadian Pacific proposed structuring the combination would violate a prohibition against an acquiring railroad taking control of its target before a deal is approved.

It's set up as a voting trust, with Canadian Pacific CEO Hunter Harrison taking over Norfolk Southern while the deal is being reviewed by regulators.

In a Tuesday report, Canadian Pacific said that Norfolk Southern is wrong to think the Surface Transportation Board wouldn't approve such a structure. It said that tactic is common in railroad mergers because of the prolonged review needed.

Canadian Pacific also said it doesn't believe its proposed merger with Norfolk Southern would necessarily trigger additional deals among the other major railroads, as some analysts predict, and would actually increase competition.

Norfolk Southern issued a statement Tuesday afternoon challenging Canadian Pacific to back up its opinion by asking regulators to rule on the proposed deal's structure.

Stifel analyst John Larkin said he thinks it's unlikely regulators would approve the deal. And even if it goes through, he said a difficult proxy fight would make it difficult to successful integrate the railroads.

Canadian Pacific executives plan to hold a second conference call with investors Wednesday about the deal.

Norfolk Southern Corp. shares rose $1.67, or 1.9 per cent, to close at $91.02 Tuesday. U.S. shares of Canadian Pacific Railway Ltd. rose $1.97, or 1.6 per cent, to $125.



Advertisements

Latest Economic News

  • Tim Hortons offering poutine doughnut on Canada Day — but only in the U.S.

    Economic CBC News
    To celebrate Canada's 150th birthday, Tim Hortons is serving up patriotic food. On the menu: a doughnut smothered in poutine and an Iced Capp coffee drink topped with whipped cream, maple flakes and bacon bits. Source
  • Online thrift store ThredUp expanding to Canada

    Economic CTV News
    TORONTO - After operating in the U.S. for nearly a decade, online thrift store ThredUp is expanding into Canada and setting its sights on shoppers who want to stay stylish but save their dimes. Some retail experts caution the company may find it difficult amid the growing popularity and proliferation of charity-based organizations and fast-fashion retailers who already appeal to the budget-conscious. Source
  • Asian stocks rally after Wall Street rebounds

    Economic CTV News
    HONG KONG -- Asian shares rallied Thursday following Wall Street's rebound as investors regained confidence in the global economic outlook. KEEPING SCORE: Japan's benchmark Nikkei 225 index rose 0.6 per cent to 20,242.63 and South Korea's Kospi advanced 0.7 per cent to 2,399.41. Source
  • Tip Top Tailors owner sells assets in deal that will see 140 stores remain open

    Economic CTV News
    TORONTO -- The assets of Grafton-Fraser Inc., owner of Tip Top Tailors and other menswear chains, have been bought by U.S.-based GSO Capital Partners in a move to stabilize the Canadian retail business. As part of the agreement, the new operators of the Toronto-based retailer is keeping 140 stores open across the country, while 12 underperforming locations have been closed, affecting 100 jobs. Source
  • Staples to be acquired by Sycamore in $6.9B US deal

    Economic CBC News
    Private equity firm Sycamore is buying office supplies chain Staples for $6.9 billion US. The companies said Wednesday that shareholders of Framingham, Mass.-based Staples will get $10.25 US per share. Staples stock had closed Wednesday up 77 cents, or 8.4 per cent, to $9.93 on a late-afternoon report of a deal. Source
  • Cyberattack spreads across the globe, but its origins and purpose remain murky

    Economic CBC News
    As a cyberattack continued to spread among nations and corporations on Wednesday, the identity and motives of the attackers remain a mystery. Ports, hospitals and banks around the globe have been hit by a version of ransomware being called ExPetr, similar to Petya but with a different functionality. Source
  • Head of NEB welcomes overhaul recommendations

    Economic CTV News
    CALGARY - The head of the National Energy Board says the proposed overhaul of the federal regulator will make it more suited to the challenges of the 21st century. Speaking at the sidelines of an industry safety workshop, NEB chairman Peter Watson says recommendations last month by a modernization panel could fix some of the limitations of the regulator and help it keep up with the times. Source
  • Boeing seeks delay in duty ruling on petition against Bombardier

    Economic CBC News
    Bombardier may have to wait an extra two months to find out if its CSeries commercial jets will be hit by punishing U.S. duties. Boeing has requested that the U.S. Commerce Department delay its preliminary determination on its petition until Sept. Source
  • Shopify sees big uptick in U.S. job applicants after Trump's election, CEO says

    Economic CTV News
    TORONTO -- Shopify's CEO says it's a great time for Canadian startups to attract talent as the U.S. government is creating an uninviting environment for a lot of people. Tobias Lutke says his company is receiving many more applications from U.S. Source
  • Shopify sees boost in applicants from U.S. after Trump's election, CEO says

    Economic CTV News
    TORONTO -- It's a great time for Canadian startups to attract top talent from south of the border as the U.S. government is creating an unwelcoming environment, the chief executive of Shopify says. "The Americans are doing a really great job of uninviting a lot of kinds of people who otherwise would go there," said Tobias Lutke, who founded the e-commerce platform firm in 2004. Source