Canadian Pacific drops railroad merger attempt

Norfolk Southern officials responded by thanking shareholders for standing by management during three hostile takeover attempts. (Source: Norfolk Southern)

HOUSTON (ICIS)–Canadian Pacific Railway (CP) announced on Monday that it has terminated efforts to merge with Norfolk Southern and withdrew a resolution asking the US company’s shareholders to vote in favour of good-faith negotiations.

Having rebuffed the CP merger offer three times, Norfolk Southern officials issued a statement thanking its shareholders for their support during this period.

“Since the company’s new management team was appointed, Norfolk Southern has been focused on implementing a strategic plan to streamline operations, reduce expenses and maintain superior customer service levels,” said Norfolk Southern.

CP officials said that they still feel the proposal would have created a true end-to-end railroad and enhance competition, ease freight congestion, improve service and generate significant shareholder value for both companies. 

However, CP officials said that no further financial offers or overtures are planned at this time.

“We have long recognised that consolidation is necessary for the North American rail industry to meet the demands of a growing economy, but with no clear path to a friendly merger at this time, we will turn all of our focus and energy to serving our customers and creating long-term value for CP shareholders,” said CEO Hunter Harrison.

The decision follows the 8 April setback when US Department of Justice (DOJ) filed in opposition to CP’s petition for a declaratory order that would allow the use of a voting trust pending the Surface Transportation Board’s (STB) review of the proposed merger.

The federal agency said the voting trust would fail to preserve the independence of the merging railroads during the regulatory review. The DOJ had urged the STB to reject the voting trust, or at least deny the request for a declaratory order. 

In response, CP issued a statement to ICIS stating its disappointment in the DOJ’s stance, claiming voting trusts have been used in 144 transactions overseen by the STB since deregulation of the rail industry in 1980.

(INSET IMAGE: Canadian Pacific locomotive, left, by Neale Clark / robertharding/REX Shutterstock. Image at right supplied by Norfolk Southern.)