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November 17, 2015

Norfolk Southern considering Canadian Pacific’s merger offer

Canadian Pacific (CP) has made an offer to buy US rail company Norfolk Southern (NS) for $28.4bn, which would create the largest rail company in North America.

Canadian Pacific

Canadian Pacific (CP) has made an offer to buy US rail company Norfolk Southern (NS) for $28.4bn, which would create the largest rail company in North America.

CP said that the proposed business combination would lead to a transcontinental railroad that will deliver enhanced levels of service to customers and communities, as well as improve competition and create significant shareholder value.

Norfolk termed the offer ‘low-premium, non-binding and highly conditional’ and noted that their board of directors, in consultation with its financial and legal advisers, would carefully evaluate the offer.

However, it said that any consolidation among Class I railroads in North America would face significant regulatory hurdles.

CP is offering Norfolk shareholders $46.72 in cash and 0.348 CP share for every NS share they own.

At the close of trading on Tuesday, CP is worth C$28.4bn ($21.3bn), while NS is worth $26bn.

"The merger of Norfolk will provide a new approach to terminal access."

NS operates 20,000 route miles in 22 states, mostly in eastern US, while CP transports to eight major ports in the US and Canada, including Vancouver and Montreal.

CP’s attempt to buy railroad operator CSX failed last year.

The company said the merger of Norfolk will provide a new approach to terminal access.

"In the event the new company failed to provide adequate service or competitive rates, it would allow another carrier to operate from a point of connection over the combined company’s tracks and into its terminals, providing an unprecedented alternative to the affected shipper," it added.


Image: Canadian Pacific offers $28.4bn to buy Norfolk Southern. Photo: courtesy of Canadian Pacific.

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