Canadian Pacific Railway Ltd. is leaving a proxy fight for Norfolk Southern Corp. but nonetheless plans to pursue a takeover from the U.S. carrier, a person acquainted with the program said.
Canada’s second-largest railroad likely won’t present an alternative slate of directors at Norfolk Southern’s annual meeting, said the person, who asked to not be identified since the deliberations haven’t been made public. Instead, Canadian Pacific will probably request a nonbinding resolution around the ballot which may ask the Norfolk Southern board to begin talks, the individual said Tuesday.
Canadian Pacific Chief Executive Officer Hunter Harrison is due to speak in an investor conference in Coral Gables, Florida, on Wednesday afternoon, and could make a comment regarding Norfolk Southern then, the individual said. Representatives for Norfolk Southern and Canadian Pacific declined to discuss the plans, that have been reported earlier by Dow Jones.
Acquiring Norfolk Southern would allow Harrison to produce a coast-to-coast railroad that eliminates rail-car exchanges between your carriers and would enable him to use his efficiency expertise to Norfolk Southern, which lags behind other large carriers in key service measures. Norfolk Southern’s board has rejected proposals from Canadian Pacific – including one in mid-December that was valued at about $27 billion.
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Norfolk Southern fell less than 1 percent to US$70.19 at 12:30 p.m. in New York, while Canadian Pacific was little changed at $169.83 in Toronto.
Activist investor Bill Ackman, whose Pershing Square Capital Management is Canadian Pacific’s second-largest shareholder, said on the business call on Dec. 16 the simplest way forward is always to submit a shareholder resolution urging Norfolk Southern’s board to take a seat with Canadian Pacific management to go over a possible merger.
“I believe shareholders would overwhelmingly approve that resolution,” Ackman said at the time. The investor and Canadian Pacific hadn’t eliminated a proxy fight at that time. Such a move, including nominating a slate of directors, was the “more aggressive way,” Ackman said.
The deadline to submit proxy materials or shareholder proposals for Norfolk’s annual general meeting is Feb. 14, based on its website.
The U.S. Surface Transportation Board has gotten a large number of comments around the potential deal from various stakeholders, including shipping customers, other railroads and lawmakers. Some shippers have expressed support for any merger, while most the submissions have said further rail consolidation would hurt competition.
Bloomberg News
