CP Rail sweetens Norfolk Southern with higher bid

November 23, 2015

Canadian Pacific Railway Ltd. is willing to sweeten its $28 billion takeover offer for Norfolk Southern Corp. and is “going to do everything we can” to court the U.S. carrier’s shareholders, Chief Executive Officer Hunter Harrison said.CP company photo locomotive-2

After an initial meeting last week with Norfolk Southern management ended inconclusively, getting the deal moving will take “a little more money” and pressure from investors, Harrison said Friday in an interview at Bloomberg’s headquarters in New York.

“I prefer not to use the word hostile — you all can describe it as you see fit,” Harrison said. “We’re going to work diligently to get to the shareholders. They deserve to see this, to understand it. We’ve already at their request shared the strategy. Some of them came to us and said: ‘Make a move.’ They’re big holders. They’re players, and there’s not only one.”

Harrison’s comments escalated his campaign to create a transcontinental railroad by combining Canada’s second-largest carrier with Norfolk Southern, the No. 2 operator in the eastern U.S. The CEO, a veteran railroader recruited out of retirement to lead Canadian Pacific by activist investor Bill Ackman, is bucking the long-held industry view that the era of big mergers is over.

Harrison returned several times to the idea that Norfolk Southern shareholders found the concept of a combination intriguing. Some even suggested he explore a deal, he said.

“It’s fair to say we’ve had a good bit of dialogue with their shareholders,’’ he said. ‘’Some of them brought these ideas to us, whether we already had them or not. If it’s a good deal for the shareholders, why is it not a good deal for the overall organization? They’re going to have to answer that. I can’t.”Website Insert Start Here copy

Canadian Pacific doesn’t want to surrender its investment- grade credit rating, which will put a cap on how high an offer the Calgary-based railroad may make, Harrison said, while declining to elaborate on the terms.

“We’re not going to go crazy,” Harrison said. “I’m not in love with a deal. So is there a place where we are going to say: ‘Price is too high. We’re walking?’ Absolutely.”

Harrison also said he planned to reach out again Friday to CEO James Squires at Norfolk, Virginia-based Norfolk Southern.

“Given some of their wants, we’re happy to sit down with them,” Harrison said. “In fact I think there’ll be some correspondence going out to them today saying ‘Let’s sit down and talk.’ Through an e-mail.’’

Read the full story from Bloomberg reporter Frederic Tomesco in the Toronto Star by clicking here.

 

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