Canadian Pacific Terminates Efforts to Merge with Norfolk Southern
“No further financial offers or overtures to meet with the NS board of directors are planned at this time,” said a CP statement.
CP claims its proposed merger would have created “a true end-to-end railroad that would enhance competition, ease freight congestion now and into the future, improve service to shippers, better support the economy and generate significant shareholder value for both companies.”
Norfolk Southern operates 20,000 route miles of track in 22 eastern states, and serves all of the region’s major container ports. It connects with the western railroads in Chicago and Kansas City, two cities also served by Canadian Pacific.
Canadian Pacific’s network reaches across southern Canada from Montreal to Vancouver, and also includes assets in the U.S. midwest that connect to a rail hub in Chicago.
The NS board unanimously rejected CP’s $28.4-billion offer late last year, calling the proposed buy-out “grossly inadequate” and “low premium.” In a lengthy letter in response to the CP offer, the Norfolk Southern further stated that even if the deal, if it eventually materialized, would be subject to multiple regulatory restrictions.
“We have long recognized that consolidation is necessary for the North American rail industry to meet the demands of a growing economy,” said E. Hunter Harrison, CP’s CEO. “But with no clear path to a friendly merger at this time, we will turn all of our focus and energy to serving our customers and creating long term value for CP shareholders.”
Canadian Pacific held merger talks with CSX Corp. in 2014 which proved fruitless.
The Canadian Pacific was first reported to be exploring an NS deal in November of last year and was also raising financing for the takeover.
The deal would have represented a major consolidation of the North American rail industry, which has seen the number of Class I railroads shrink from 56 to six since railroads were deregulated in 1980.
Norfolk Southern and CSX operate in the eastern half of the United States, while Union Pacific and Burlington Northern Santa Fe (BNSF) operate in the western half. The Class Is also include Canada’s two main Canadian freight railways, Canadian National and Canadian Pacific, both of which also have holdings in the United States.
The CEOs of the Union Pacific and CSX railways, two other North American Class I railroads, were on the record in opposition to the CP-NS deal.
So was Edward Wytkind, president of the Transportation Trades Department of the AFL-CIO. “We are pleased that Canadian Pacific has ended its ill-advised hostile takeover bid for Norfolk Southern,” said Wytkind. “The Transportation Trades Department, AFL-CIO, urged regulators to reject merger schemes that harm the economy, freight service, safety and the public interest, and slash middle class rail jobs. Canadian Pacific’s plan failed on every count.”