Canadian Pacific Has Other Plans if Norfolk Southern Deal Falls Through

[NS Newsfeed]

Canadian Pacific Railway Ltd. would likely buy back stock or raise its dividend if the company's plans to acquire rival Norfolk Southern Corp. fall through, Canadian Pacific's chief executive said Wednesday.



"If this [merger] doesn't work, we're not going to have a funeral," Chief Executive Hunter Harrison told a transportation industry conference. "We would take a look at the use of other capital, maybe an aggressive buyback, maybe a little dividend. We'll go about our business and life is good."



The company could also explore smaller acquisitions that "might enhance the business, but nothing of the magnitude we're talking about now," he said, referring to its $28 billion proposal for Norfolk Southern.



The Calgary, Alberta-based railway first approached Norfolk Southern with a cash-and-stock merger proposal in November. Norfolk Southern has refused to engage in talks and has dismissed Canadian Pacific's bid as inadequate and unlikely to win regulatory approval.



"We think that an end-to-end merger is good," Mr. Harrison said. "I don't see a lot of negatives about it, except the people may be a little selfish and want to protect the status quo."



Canadian Pacific said Tuesday that it would seek an order from the U.S. Surface Transportation Board declaring that the voting trust structure the railroad has proposed in its plan to buy Norfolk Southern is valid. The move could help it win shareholder support and comes about a week after it abandoned its threat of a proxy fight.



"If the [Norfolk Southern] shareholders don't support [the voting trust], then I'd say that's another nail in the coffin if you think this transaction might go through," Mr. Harrison said.



Norfolk Southern shareholders are expected to vote on Canadian Pacific's nonbinding resolution for the board to start negotiations at the company's upcoming annual meeting. The date for that meeting hasn't been set.