Eastern Railroad Discussion > CP drops efforts to merge with NS

ByANNE STEELEUpdated April 11, 2016 8:32 a.m. ET0 COMMENTSCanadian Pacific Railway Ltd. on Monday said it would drop its fight to merge with rival railroad Norfolk Southern Corp., saying it sees “no clear path to a friendly merger at this time.”The company said it withdrew its resolution asking Norfolk Southern shareholders to vote in favor of good-faith negotiations and that it doesn’t plan any further financial offers or overtures.“We will turn all of our focus and energy to serving our customers and creating long term value for CP shareholders,” said Canadian Pacific Chief Executive Hunter Harrison.Calgary, Alberta-based Canadian Pacific first launched a roughly $30 billion takeover bid for East Coast rival Norfolk Southern in November and was rebuffed by Norfolk, who said it undervalued the company. With a merger, Canadian Pacific sought to create a North American railroad that stretches from the West Coast of Canada to the Gulf of Mexico and Atlantic Ocean in the U.S.READ MORE After threatening a potential proxy fight, executives decided to strike a friendlier tone, calling for shareholders to vote yes for merger talks.=11pxAdvertisement Late last month, Norfolk Southern Chief Executive Jim Squires said that the company was making good progress on restructuring plans and urged employees to vote no on merger talks. Separately, the railroad’s board indicated it would be willing to start merger discussions if Canadian Pacific “meaningfully” increased its offer.It’s also been unclear if U.S. regulators would sign off on such a deal. The U.S. Justice Department’s top antitrust official had raised competition concerns about the proposed voting-trust structure that would involve the two rail giants if they merged, saying it could allow the companies to accomplish much of the tie-up before a government review was completed.Canadian Pacific had petitioned the U.S. Surface Transportation Board, whose approval is required for rail mergers, for an order that would allow the companies to operate during the estimated two-year period regulatory approval would take.Canadian Pacific, backed by shareholder activist William Ackman, has been seeking to create a transnational U.S. railway since 2014 when it made an unsuccessful overture to CSX Corp. Mr. Ackman had promised investors at Norfolk Southern that Canadian Pacific’s veteran CEO, Mr. Harrison, could repeat his turnaround success in Canada by eliminating expensive bottlenecks in the fragmented U.S. rail network. Norfolk has disappointed shareholders for years with one of the worst operating performances in the industry.Shares of Norfolk Southern edged 1.2% lower premarket while Canadian Pacific stock remained inactive.Write to Anne Steele at Anne.Steele@wsj.com



Edited 2 time(s). Last edit at 04/11/16 06:18 by PennPlat.

Jim Cramer thinks "coal has had it."

Mr. Cramer might change his opinion on coal come November 8.  More oil movement by pipeline might also come to reality on that date.



Edited 1 time(s). Last edit at 04/11/16 06:22 by PennPlat.

Cramer is correct. There is plenty of cheap gas available from the various shale plays. Pipelines are cheaper than rail transport and gas doesn't have the enviornmental costs associated with coal burning and then safely disposing of the ash.   Right now, the Texas, Gonzales & Northern has a conplete set of Kansas Power & Light  Ortners set out in Harwood TX.  Wheels are doing their best to rust to the rails.    

elu34ch Wrote:
-------------------------------------------------------
> Jim Cramer thinks "coal has had it."

We heard that repeatedly around 2000.  The smart railroads and ports and utilities did not disinvest in coal at that time.

PennPlat Wrote:
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> Mr. Cramer might change his opinion on coal come
> November 8.  More oil movement by pipeline might
> also come to reality on that date

All the pipelines to Oklahoma and Texas that could be built don't do much good getting Alberta and North Dakota oil to the Delaware Valley/New Jersey and West Coast refineries.

Some good news for a change

The railroads could do a lot to unscrew up Chicago by ramping up their carload marketing to recapture short and medium haul market share under 1000/1500 miles total that they have been giving away to trucks for the past 20 years.  The reduction in manifest train service and carloads means fewer trains can be run around Chicago from major outlying yards and more trains are run into Chicago to Clearing, etc. or from nearby major class yards like Elkhart and Galesburg instead of having entire trains moving to more distant points like Northtowne, Argentine, Enola, Selkirk, etc.

Good. It was illogical with no real advantage to either railroad or the shippers. The arguments for it were overstated and weak, especially that such a merger would improve traffic flow. in Chicago. It would have given CP a 73.5% control of the IHB when the major traffic flow on that belt line is between UP from the west and north to NS and CSX to the east and UP to the south down the old C&EI.

Perhaps Hunter has  "saved" his last railroad.  Deo Gratias.

Art House

Harrison did not get where he is by being a quitter.

Kansas City Southern offers Canadian Pacific an outlet to the Gulf Coast, and they aren't as powerful
as NS to be able to resist him. 

That's a good point, but he has said in the past, if I am not mistaken, that he doesn't trust the Mexican market for some reason. Perhaps he will change his mind.

As I said on the other side, Hunter was all set to fix the NS steam program! As to a KCS purchase, with another
Canadian road controlling a parallel route? Yah, right.

Out

I understand EHH has now set his sights on the Belfast & Moosehead Lake.

KG

Some one told him that it served a bustling port and since the information didn't come from someone
in TE&Y he believed them.

Out

GenePoon Wrote:
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> Harrison did not get where he is by being a
> quitter.
>
> Kansas City Southern offers Canadian Pacific an
> outlet to the Gulf Coast, and they aren't as
> powerful
> as NS to be able to resist him. 

True, but I get the feeling KCS isn't interested in a merger/takeover nor will they be anytime soon.  Any potential CP/KCS or NS/KCS merger drags UP into it (KCS has trackage rights on a few UP lines).  And you can be sure BNSF would have something to say about it too.

The trip up in any KCS merger is how to handle KCS de Mexico.  The merger laws in Mexico are quite different.  I believe "BobE" might know what they are and how it could effect any potential merger.  This might be why Harrison would seem reluctant to get involved.  Plus the Laredo gateway is huge business for UP too.  UP would fight to keep it.


Allen



Edited 3 time(s). Last edit at 04/11/16 13:32 by bradleymckay.

kgmontreal Wrote:
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> I understand EHH has now set his sights on the
> Belfast & Moosehead Lake.
>
> KG

Well, I heard the Disneyland RR was next on his list...


Allen

bradleymckay Wrote:
-------------------------------------------------------
> GenePoon Wrote:
> --------------------------------------------------
> -----
> > Harrison did not get where he is by being a
> > quitter.
> >
> > Kansas City Southern offers Canadian Pacific an
> > outlet to the Gulf Coast, and they aren't as
> > powerful
> > as NS to be able to resist him. 
>
> True, but I get the feeling KCS isn't interested
> in a merger/takeover nor will they be anytime
> soon.  Any potential CP/KCS or NS/KCS merger
> drags UP into it (KCS has trackage rights on a few
> UP lines).  And you can be sure BNSF would have
> something to say about it too.
>
> The trip up in any KCS merger is how to handle KCS
> de Mexico.  The merger laws in Mexico are quite
> different.  I believe "BobE" might know what they
> are and how it could effect any potential
> merger.  This might be why Harrison would seem
> reluctant to get involved.  Plus the Laredo
> gateway is huge business for UP too.  UP would
> fight to keep it.
>
>
> Allen

Allen is spot on.
UP was out bid by KCS for the lines in Mexico that are now KCS de M. I cannot imagine that UP would stand by and simply allow CP or any other road for that matter to acquire KCS without a fight.
EHH needs some time to collect his thoughts after almost steeping off a cliff.
ALLEN

See my post on the western board. The KCS financials are a lot different than NS.

If I was king of UP, etc I would be talking with Vanguard etc about the strategic environment.

Posted from Android

Timing is everything. The CP proposal for the NS Annual Meeting arrived in the mail today. (In contrast, the NS annual report arrived a week ago).

CP stuff has been "filed" (recycle bin).