Supporters of CP Rail merger with Norfolk Southern express support to regulator

MONTREAL -- The regulator that decides the fate of railway mergers in the United States is receiving letters of support for Canadian Pacific Railway's unsolicited proposal to buy Norfolk Southern.

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Since early January, the Surface Transportation Board has received 16 letters of support from companies based in Canada and the U.S., according to its website.

It marks a reversal from December when only opposition and concerns were raised in letters from politicians, unions and some customers, even though the agency has not been presented with a formal offer to consider.

Each of the letters supporting CP's (TSX:CP) proposal are virtually identical.

"CP's proposal is a timely one that introduces a number of positive, future-focused ideas to vastly improve North America's transportation network," said letters sent from companies including Calgary Metal Recycling, Tampa's Trammo and Windstar LGP Inc.

They repeat the advantages that have been espoused by CP Rail since it first submitted an unsolicited offer that Virginia-based Norfolk Southern has repeatedly rejected.

Norfolk Southern declined to comment on the letters while its Calgary-based rival didn't immediately respond to questions, including whether it had a role in the letter-writing campaign.

In response to letters of opposition that raised similar concerns espoused by Norfok, the STB said any merger proposal would be subject to a "rigorous administrative review."

Chairman Daniel Elliott and two other board members said the merger rules adopted in 2001 require applicants to show that a merger is in the public interest by demonstrating benefits such as improved service and competition outweigh potential negative effects like service disruptions.

Norfolk Southern has rejected CP's offer valued at about US$30 billion, arguing it will do better if it remains independent.

Canadian Pacific has argued that combining the two companies to create North America's largest railway would improve performance and generate about US$1.8 billion in annual costs savings.



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