Author Topic: NS critical of offer from CP  (Read 2114 times)

Offline Matt L

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NS critical of offer from CP
« on: November 23, 2015, 08:13:51 PM »
I'm guessing most of us have heard the enws by now, but if you haven't...

Quote
U.S. railroad operator Norfolk Southern Corp (NSC.N) all but rejected a $28.4 billion acquisition offer by Canadian Pacific Railway Ltd (CP.TO) on Tuesday, calling it "low-premium" and warning it would face significant regulatory hurdles.

While Norfolk Southern said it would carefully evaluate the offer, its sour response represents a setback to Canadian Pacific as well as its largest shareholder, William Ackman's activist hedge fund Pershing Square Capital Management LP.

<snipped>

The STB has a public interest test when considering whether to approve mergers, so a deal would not only have to address antitrust concerns but also result in improved service, economic efficiencies and public safety for those using the railways.

Yet not only has Canadian Pacific failed to convince Norfolk Southern that the merger could receive regulatory clearance, it has offered no protection for Norfolk Southern shareholders in the event the deal would be blocked, according to a source who asked not to be identified because details of the discussions are not public.

The first time Canadian Pacific contacted Norfolk Southern about the deal was after a Bloomberg News report on Nov. 9 that cited people familiar with the matter who said the two companies had held early-stage merger talks, the Reuters source added.

Norfolk Southern Chief Executive James Squires subsequently met with Harrison in Florida last week to discuss the potential merger, according the source. Squires told Harrison he viewed the regulatory obstacles as insurmountable and that Norfolk Southern had a plan of its own to drive shareholder value, the source added.

Read more at Reuters  http://www.reuters.com/article/2015/11/19/us-norfolk-southern-m-a-cp-idUSKCN0T62OG20151119#A5GXciQPlqph38CK.99

As an NS shareholder, I oppose this deal. I won't be getting a fair value for the money I've invested in NS stock. With that being said, non-stockholders should be worried, too. I've watched CP retrench from the Northeast. CP skimps on service and safety. There's even the possibility that CP would close the shops at Chattanooga and/or Altoona as a cost cutting move. CP could bypass Chicago now if they worked out a haulage agreement or two. (Among other things, the 2 RRs could expand their interchange in Buffalo and Detroit.) Thankfully, it looks like NS wants no part of this deal... and the STB would probably kill it anyway.


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Offline steveiez

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Re: NS critical of offer from CP
« Reply #1 on: November 24, 2015, 11:37:48 AM »
I don't think NS will do it and the US government would not approve it on grounds of a monopoly'

A monopoly does not have to control all of it, just most of it too be considered a monopoly.
Steve

Offline TheVARailFan

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Re: NS critical of offer from CP
« Reply #2 on: November 24, 2015, 09:31:26 PM »
CP must be really desperate to expand, first CSX and now a few month's later NS... Thankfully NS doesn't seem interested and the feds wouldn't allow it regardless.
TheVARailFan; home base: Norfolk, VA

Offline Matt L

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Re: NS critical of offer from CP
« Reply #3 on: November 25, 2015, 07:28:59 PM »
CP must be really desperate to expand, first CSX and now a few month's later NS... Thankfully NS doesn't seem interested and the feds wouldn't allow it regardless.

The hedge fund that owns CP has a serious problem because one of the other companies in which they hold stock is tanking. Hence there is pressure on CP to expand.
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Offline Matt L

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Re: NS critical of offer from CP
« Reply #4 on: November 25, 2015, 07:41:27 PM »
I don't think NS will do it and the US government would not approve it on grounds of a monopoly'

A monopoly does not have to control all of it, just most of it too be considered a monopoly.

Agreed. Among other things, CP would have a 75% share of the Indiana Harbor Belt RR, which is crucial for providing access to Chicago from the east. CSX and NS each have a 25% share in IHB now, with CP owning the other 50%. CSX would have a legitimate concern about being shoved aside as the minority stakeholder in IHB if CP acquired NS. Any effiiciencies gained by CP in that scenario would be at the expense of CSX. I could see the STB forcing CP to sell NS's stake in IHB to CSX to keep the competition in place and that would erase one of CP's reason for acquiring NS.

Also, a combined CP/NS would own just 33% of the Belt Railway of Chicago. Regardless of whether the other 4 Class 1s who co-own and use BRC merge or not, they'd still outvote CP/NS. Again, CP won't get the "efficiency" they desire.

Third, I can see CSX complaining about the former D&H line between Schenectady and Montreal. It would no longer be a neutral gateway between the Northeast and eastern Canada. I figure the STB would have plenty to say there, too.
Got questions? I can help you with the Erie Lackawanna (including predecessors), Lehigh Valley, Delaware & Hudson and the shortlines of upstate NY.