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Norfolk Southern rejects third offer from Canadian Pacific

World Coal,

US rail operator, Norfolk Southern, has rejected a revised takeover bid from Canadian rival, Canadian Pacific (CP), saying that CP’s latest offer was “grossly inadequate”.

In a letter to CP’s CEO, Hunter Harrison, and Chairman, Andrew Reardon, published on the company’s website, Norfolk Southern reaffirmed its opposition to the deal and again noted the “substantial regulatory risks and uncertainties that are highly likely to be overcome.”

Norfolk Southern also accused CP itself of lacking in confidence in the proposed structure of the deal – which would see CP placed in a voting trust within any newly merged company until the deal had been approved.

“You have a path to seek a declaratory order from the [Surface Transportation Board] as to whether the voting trust structure your proposed could work,” said Norfolk Southern, adding that CP’s decision not to seek such an order “shows a lack of confidence” in the proposed deal.

Both Norfolk Southern and CP are categorised as Tier 1 railways by the US Surface Transportation Board, which regulates the industry and whose approval would be required before any merger could take place.

For its part, CP said it was “disappointed” by Norfolk Southern’s rejection of the offer, adding that it would now review its strategic alternatives – an indication that this contest may only just be getting started.

“CP remains confident that a CP-NS combination would secure regulatory approval as a seamless coast-to-coast single-haul service benefits shippers, the industry and the public, and would generate tremendous shareholder value,” CP concluded in a statement.

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