Proposed Norfolk Southern NS Canadian Pacific CP Acq/Merger

Topic Globalized; if you think about it, it belongs just as much in CP as it does in NS.

I've heard NS' reaction has been lukewarm to hostile. Here's hostile: Reuters

Norfolk Southern hostile to Canadian Pacific's $28.4 billion bid
Read more at Reutershttp://www.reuters.com/article/2015/11/18/us-n ... CdQ1Hky.99" onclick="window.open(this.href);return false;

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.

Ackman, a big advocate of consolidation in the North American railway sector, recruited Hunter Harrison, who had previously been chief executive officer of Canadian National Railway Co (CNR.TO), as CEO of Canadian Pacific in 2012.


Read more at Reutershttp://www.reuters.com/article/2015/11/18/us-n ... CdQ1Hky.99" onclick="window.open(this.href);return false;

Here's a press release from CP with the contents of the letter to NS.

http://www.prnewswire.com/news-releases ... 29831.html

Fair use:

We propose a 50% cash 50% stock transaction based on Friday's closing stock price for both CP and NSC in which NSC shareholders would receive $46.72 in cash and 0.348 shares of stock in a new company which would own CP and NSC. The new company would be listed on both the New York and Toronto Stock Exchanges, and maintain a strong investment grade credit rating. Our proposal represents a substantial initial 23.0% premium to NSC's 45-day VWAP of $79.14.1 In addition to providing NSC shareholders with a significant cash payment, the proposed transaction will provide NSC shareholders with an opportunity for meaningful upside appreciation in the future as synergies are realized as NSC shareholders will own 41% of the new company.

It certainly appears that Canadian media, namely Toronto Globe and Mail, and "Canada's CNBC", BNN, are far more enthusiastic about this proposed "takeover" than are any media outlets down here.

Bill and Yager are proposing a "takeover" and not any kind of "merger of equals" despite however their propagandists choose to "spin it".

Corporate tax issues may be another reason why the proposal is for CPR to take over NS. A Canada-based CPR/NS would have less tax liability than if the combined railroad were to be based in the US because US-based corporations must pay US income tax on all sources of income, foreign and domestic. Canada, like most other induatrialized nations, taxes only domestic corporate income.

Nothing but another HH ploy to bump the stock price up, just like CSX last year. It will never happen. The mega mergers are over with.

NS+CP will face many issues on both sides of the border,"anti-trust" being the biggest issue,
CP's offer is considered to be a "Hostile Takeover",NS confirms it's a lose-lose kind of deal.
Figure on objections from CSX PAR,BNSF,UP,and every shortline in the NE.
The "Ghost" of PC looms in the backround,so the Unions might object to this merger.
Hopefully Governments on both sides of the border will throw up enough "hoops" to go
thru to kill this merger off!

There has been no formal bid yet by CPR for NSC. Because NSC has rejected the terms of the proposed "merger," the only avenue open to CPR is a hostile bid. Once that occurs (if indeed it does), NSC must open the bidding to other interested parties. BNSF with Warren Buffett's deep pockets and Union Pacific will probably join the bidding. NSC as a stand alone company will cease to exist. Stay tuned.

What Yäger and Billy overlook is that I doubt if the Port of Vancouver is going to put LA/LB out of business. As a result, CSX could have a field day (hope they're up to it) handling traffic interchanged from both UP and BNSF. CP/NS would of course get some, but the "cream" would go to CSX.

This is simply a grandstand play to make for a "one day pop" in NSC. I agree with Mr. Harry E that this could well be the start of Round one to a UP/NS, BNSF/CSX, or v.v. Transcon duopoly.

Yäger, set your sights on KCS; that is attainable just to give you a level playing field with CN accessing Gulf ports.

disclaimer: author holds long positions CSX UNP

I listened to EHHs fireside chat today and he sounded confident as all getup that he's gonna get this thing done. For the life of me I don't understand all the silence coming out of NS other than to think they don't know what to do. NS's stock has gone through the roof

I had mentioned this in the NS/PAS acquisition thread, but what ports are they after? It's obvious they're not looking at trying to extend their system east again (which they ended in '94 when they sold the Canadian Atlantic Railway), and are instead just looking at getting access to more lucrative ports south of NYC.

I just don't see CP being able to eat NS whole, though; they're going to have to spin off a lot of the network to other railroads or to be a new railroad, with some favorable arrangements in favor of those railroads (as CP would be taking the lucrative/important mainlines).

Jeep21243 wrote:I listened to EHHs fireside chat today and he sounded confident as all getup that he's gonna get this thing done. For the life of me I don't understand all the silence coming out of NS other than to think they don't know what to do. NS's stock has gone through the roof

The comments I have seen I would describe as "legally necessary". Someone made an offer - no matter how good or bad that needs to be acknowledged. NS has acknowledged the offer.

NS has also characterized the offer as not being a good offer. Is there anything more to say? "Uh, no." is the initial NS response to the offer. Perhaps they will put "no" into stronger terms when they need to, but for now what NS has said is enough. They have acknowledged the offer and characterized it as poor.

The "duopoly" round of mergers that narrows the market down to two class I companies is bound to happen some day. CP's interest in merging at this time in the larger scheme of the stagnant and fragile economy seems precarious though, and it already looks like CP can't really afford it.

Additional insight is within this article appearing yesterday in the Journal (should be a freeview now):

http://www.wsj.com/articles/canadian-pa ... 1447851465" onclick="window.open(this.href);return false;

Fair Use:

Canadian Pacific Railway Ltd. ’s proposal to buy Norfolk Southern Corp. for more than $28 billion would create a rail network stretching across most of North America.

But the pact would need to satisfy the U.S. Surface Transportation Board’s rules on mergers—and that could be a tough sell.

The rules, which were passed in 2001 after decades of industry consolidation, required future merger applicants “to bear a heavier burden to show that a major rail combination is consistent with the public interest” by enhancing competition.

CP would have to submit a tower of paperwork including a so-called “Service Assurance Plan” providing information on how the companies would be integrated, including training plans, information technology systems, service disruption contingencies, labor issues and other matters.

Experts estimate that approval would take a minimum of 18 months and could take even longer because of the size and scope of the deal.

How any merger can enhance competition escapes me. If such be the case, only SOO (CP lines in US)/KCS will fit that bill in that CP would have access to Gulf ports and hence parity with CN. Both roads presently have a "run-around" of Chicago and both have access to traffic sources in Detroit (CP's existing trackage rights over NS "Water Level" through Toledo) through Conrail Shared Assets.

Interesting interview with EHH on Bloomberg this morning.
http://www.bloomberg.com/news/videos/20 ... uthern-bid" onclick="window.open(this.href);return false;

Sounds more "Good Ol' Boy" accent than Canadian to me...EHHHHHHHH

I think to watch this interview is worth your time.