The chasing by suitor Canadian Pacific of grand dame Norfolk Southern has reintroduced to the railroad chattering classes the nebulous term “public interest,” used often and broadly when mergers and other railroad maneuvers requiring regulatory approval are afoot.
Canadian Pacific on Tuesday, Feb. 16, 2016 announced it will seek a declaratory order from the U.S. Surface Transportation Board (STB) “confirming the viability of the voting trust structure that CP has suggested as part of its proposed merger with Norfolk Southern.”
Canadian Pacific on Thursday, Feb. 11, 2016 launched a new website, CPconsolidation.com, purporting the benefits of its proposed acquisition of Norfolk Southern. The website launch came two days after CP notified NS of its intent to submit a resolution to NS shareholders to ask their board of directors to engage in discussions with CP regarding a merger.
In what some industry observers believe may be a final attempt—short of a proxy battle—by hedge fund head Bill Ackman at a hostile takeover of Norfolk Southern, Canadian Pacific on Feb. 9, 2016, notified NS of its intent to submit a resolution to NS shareholders “to ask their board of directors to engage in good faith discussions with CP regarding a business combination transaction.”
Continuing its hostile pursuit of Norfolk Southern, and faced with some stiff political and rail industry opposition in the U.S., Canadian Pacific on Feb. 3, 2016 released a white paper, CP-NS: A Comprehensive Approach to Regulatory Approval “detailing the comprehensive, merit-based process any merger application would be subject to at the Surface Transportation Board,” CP said.
Norfolk Southern shareholders “continue to find themselves in the enviable position of having two Class I management teams competing to maximize shareholder value,” says Cowen and Company Managing Director and Railway Age Wall Street Contributing Editor Jason Seidl.
Amid a North-American-wide slump in traffic volume, falling prices for railroad-transported commodities like coal and oil, and an economy that appears to be increasingly unstable, Canadian Pacific, the second publicly traded Class I to report fourth-quarter and full-year 2015 financials, fell short of analyst expectations, based largely on a nosedive in net income, despite reporting record earnings per share and an improved operating ratio.
News item: Canadian Pacific (CP) is pursuing a hostile takeover of Norfolk Southern (NS). CP is asking the U.S. Justice Department to investigate whether NS and other U.S.-based major railroads—some of which oppose the takeover—are unlawfully conspiring for “the primary purpose of restraining trade.” CP says “fear of competition does not justify the collective action of competitors.” Yet the Supreme Court long ago ruled that “joint efforts to influence public officials, such as railroad regulators, do not violate the antitrust laws even though intended to eliminate competition.”
Norfolk Southern’s Jan. 12, 2015 announcement about consolidating its Pocahontas and Virginia divisions “is notable,” and CSX is facing “continued industrial challenges,” according to Cowen and Company Managing Director and Railway Age Wall Street Contributing Editor Jason Seidl.
In remarks at the Midwest Association of Rail Shippers annual meeting on Jan. 13, 2015, Lance M. Fritz, President and CEO of Union Pacific, while declining to comment specifically on the proposed CP/Norfolk Southern merger, said, “I believe a Class I rail merger is not in the best interests of the rail industry and not in the best interests of our customers.” Canadian Pacific did not appreciate Fritz’s comments, and fired a shot across UP’s bow.