Apr 11, 2016
Canadian Pacific pulls plug on its US$28B bid for Norfolk Southern
By Noah Zivitz
For the second time in less than two years, Canadian Pacific Railway (CP.TO) is abandoning a major takeover attempt. The railway announced this morning it will stop pursuing a deal with Norfolk Southern.
CEO Hunter Harrison says CP believes the industry needs consolidation. But he’s giving up on Norfolk because there’s no clear path to a friendly deal.
CP had run into opposition from Norfolk over the proposed deal, and just last week the U.S. Department of Justice delivered a setback, saying it opposed CP’s petition for a declaratory order from the Surface Transportation Board over the proposed voting trust structure.
"We have long recognized that consolidation is necessary for the North American rail industry to meet the demands of a growing economy, 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," said CP CEO Hunter Harrison in a statement Monday morning.
CP added no new offers or proposed meetings with Norfolk’s board are planned at this time.
Calgary-based CP, Canada’s second-largest railroad operator, launched its US$28-billion takeover bid for Norfolk Southern in mid-November, touting potential savings of more than $1.8-billion annually.
But Virginia-based Norfolk Southern had continually rebuffed its advances.
A number of Democratic lawmakers in Congress, including all the party’s representatives from Illinois and Pennsylvania, have spoken out against a merger.
The U.S. military also raised concerns last week, saying a merger could adversely affect the country’s national defense. The military relies on rail networks to move defense-related cargo across the country, both during peace and times of war.
Some customers including package delivery companies FedEx Corp and United Parcel Service Inc had also opposed CP’s plans out of fears that cost cutting would hurt rail services. UPS is the largest customer of the major U.S. railroads.
