125 replies to this topic

[KevinKorell]

Bloomberg, 11/9/15:

 

Canadian Pacific Said to Explore Norfolk Southern Takeover

 

Canadian Pacific Railway Ltd., the second-biggest railroad in Canada, is exploring a takeover of U.S. carrier Norfolk Southern Corp. in a fresh attempt to consolidate the North American industry, according to people familiar with the matter. The shares surged on the news.

 

Story

[CNJRoss]

CP news release:

 

 

Canadian Pacific Railway Limited responds to recent market activity

November 9, 2015 Calgary, AB

​​​

​​​​At the request of IIROC, on behalf of the Toronto Stock Exchange, Canadian Pacific Railway Limited (TSX:CP)(NYSE:CP) advises that there is no material news pending at this time.

 

CP does not comment on market rumour and speculation.

 

[CNJRoss]

Railway Age, 11/9:

 

CP + NS is in play: Reports

 

Canadian Pacific Railway has held early-stage merger talks with Norfolk Southern and is raising financing for an acquisition, according to Nov. 9, 2015 news reports citing confidential sources at both carriers. NS stock jumped 11%, the most since 2008, to $88.62 at the close of the New York Stock Exchange, while CP’s 5.7% rally to C$188.79 on the Toronto Stock Exchange was its biggest gain since 2013.

 

CP’s bid for NS is viewed as CP’s revived attempt to form a North American transcontinental Class I after fruitless merger talks with CSX in 2014. In floating the possibility of a merger with CSX, CP CEO Hunter Harrison challenged the long-held industry view that it was pointless to even discuss another merger because federal regulators would not allow it.

 

That view could be changing. Another megamerger—leading to a final round of consolidations—could be possible, though gaining regulatory approval would be a lengthy process, industry observers say.  .  .  .

 

Continue here.

[CNJRoss]

The Globe and Mail, Toronto 11/9:

 

CP Rail takeover of Norfolk would fulfill Harrison strategy

 

A takeover of Norfolk Southern Corp. by Canadian Pacific Railway Ltd. would give Hunter Harrison his dream: a railway that reaches three coasts.

 

The chief executive officer of Calgary-based CP could be a step closer to achieving that goal, after he tried and failed to buy CSX Corp. last year.

 

Continue here.

[CNJRoss]

Reuters, 11/10:

 

Opinion Column
 

Savings may get $50 bln rail deal across the line

By Robert Cyran

 

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

 

Canadian Pacific Railway may yet manage to cross the border. The $22 billion railroad company may try to buy slightly larger Norfolk Southern. If CP can boost its U.S. rival’s operating efficiency toward its own higher level, the result would be at least $7 billion worth of cost savings. That’s enough to cover a premium and compensate for the risk of an antitrust derailment.

 

CP’s efficiency ratio, or operating expenses as a percentage of revenue, has now been ground down to just below 60 percent. That’s impressively low compared to rivals, and it’s important because railroads are capital-intensive, and keeping operating costs down is critical. Norfolk Southern has been on an efficiency drive of its own, but its ratio is still about 9 percentage points higher than CP’s.

 

SNIP

 

CP couldn’t get CSX, another U.S. railroad, on board with a deal last year, though. And regulators might worry about giving a big merger a green light in an already consolidated market. The U.S. Surface Transportation Board even vetoed a large cross-border deal about 15 years ago. Given the potential savings, however, Canadian Pacific may decide a deal is worth pursuing despite the risks.

 

More here.

[CNJRoss]

BloombergBusiness, 11/10:

 

Buffett's Rail CFO Sees Challenges for Rivals Seeking to Merge

 

• BNSF's Piggott comments in call for bondholders, analysts
• `The regulatory environment is still challenging,' she says

 

Julie Piggott, the chief financial officer of the railroad at Warren Buffett’s Berkshire Hathaway Inc., said government watchdogs may be reluctant to allow more consolidation of major companies in her industry.

 

The topic of regulators’ response to a possible merger was broached on a call for bondholders of Berkshire’s BNSF Railway on Tuesday, a day after Bloomberg News reported that Canadian Pacific Railway Ltd. was exploring a takeover of U.S. carrier Norfolk Southern Corp.

 

“This is still very speculative, I think, and rumor-based, but in our view we think that the regulatory environment is still challenging,” Piggott said. “So we’ll see where this goes.”

 

Continue here.

[CNJRoss]

Business News Network, 11/10:
 

 

Potential CP-Norfolk rail merger 'highly unlikely,' says analyst

 

A merger between Canada’s CP Rail and Norfolk Southern is “highly unlikely,” although not impossible, one rail analyst tells BNN.

 

Any merger of the two railway companies would likely face a great deal of regulatory scrutiny from authorities in both Canada and the U.S. as well as stiff opposition from customers, says ABH Consulting principal Tony Hatch. “This would require a delicate diplomatic dance to get approval in both countries and support in the political realm of both countries,” he told BNN.

 

Continue here w/video interview.

[CNJRoss]

BloombergBusiness, 11/16:

 

Ackman's 71-Year-Old Rail CEO Hunts for His Biggest M&A Deal Yet

 

• Hunter Harrison of Canadian Pacific may be on the prowl again
• Target is said to be U.S. carrier Norfolk Southern Corp.

 

The man Bill Ackman brought in to run Canada’s second-biggest railroad likes to say one of his missions is to “make the assets sweat” -- in other words, really put them to work. He could say the same about his investment bankers.

 

A railroader for more than five decades, Hunter Harrison is an inveterate dealmaker who helped drive the industry’s initial consolidation wave in the 1990s. Now, his Canadian Pacific Railway Ltd. is exploring a takeover of U.S. carrier Norfolk Southern Corp., people familiar with the matter told Bloomberg News last week.

 

A deal for Norfolk Southern, the second-biggest railroad in the eastern U.S., would revive the 71-year-old CEO’s efforts to build a transcontinental carrier after talks with CSX Corp. ended last year. A merger would offer a sterner test that anything he’s ever done because of its sheer size and would mark the first major North American takeover since Warren Buffett’s purchase of Burlington Northern Santa Fe Corp. in 2010.

 

“The investment community would probably have more confidence in Hunter than anyone else in the industry to pull off something so large and complicated as this,” said Mark Levin, an analyst with BB&T Capital Markets in Richmond, Virginia. “He’s probably licking his chops at the opportunity to really create a very large, powerful and incredibly efficient railroad.”

 

Continue here.

[CNJRoss]

Railway Age,  11/16:
 

 

CP-NS transcon a craps table roll

 

Few obstacles bedevil railroads as has the Mississippi River. Spanning it was the nation’s first rail bridge in 1856—promptly assaulted by steamboat Effie Afton. While the bridge was repaired and more constructed, the river remains a problematic divide, separating, with few exceptions, eastern railroads from those operating in the West and producing grueling interchange bottlenecks at Chicago.

 

Whether single-line transcons encompassing U.S. railroads is a solution prompts spirited debate. For dissimilar reasons, past transcon efforts failed—Seaboard Coast Line (now part of CSX) with Southern Pacific (now part of Union Pacific); BNSF with Canadian National (CN); and Canadian Pacific (CP) with CSX.

 

Dreamers remain, including 71-year-old Hunter Harrison, CP’s CEO—a brusque presence who has so improved productivity on the three railroads he superintended (Illinois Central, CN and CP) that comparisons are made with industrial engineering legend Frederick Taylor.

 

Whether Harrison will create a legacy rivaling 19th century titans James J. Hill, Collis Huntington and Cornelius Vanderbilt by securing regulatory approval to create the first North American transcon by hitching CP, end-to-end, with Norfolk Southern (NS), is unknown.

 

Notwithstanding pro-competitive features, formidable obstacles include skeptical CP stockholders, NS itself, other railroads, regulators, Congress and the new Canadian prime minister.

 

Continue here.

[CNJRoss]

CP News Release:

CP Proposes Business Combination to Norfolk Southern

November 17, 2015 Calgary, AB

​

​Canadian Pacific (TSX:CP) (NYSE:CP) today announced that it has sent an offer letter to Norfolk Southern Corp. (NS) proposing a business combination that would create a transcontinental railroad with the scale and reach to deliver improved levels of service to customers and communities while enhancing competition and creating significant shareholder value.  

 

The proposal, which includes a sizable premium in cash and stock offered to NS shareholders, would result in a company with the potential for faster earnings growth than either CP or NS could achieve on their own, all the while maintaining a strong investment grade credit rating.

CP strongly believes that the combined railroad would offer unparalleled customer service and competitive rates that will support the success of the shippers and industries it serves, and satisfy the U.S. Surface Transportation Board and Canadian regulators.

 

Among the combined company's key innovations is a new approach to terminal access that would change the status quo in U.S. rail transportation. 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. 

 

In addition, the new company would give shippers the choice of where they can connect with another railroad along its network, bringing an end to the practice of "bottleneck pricing" to a large number of shippers in the U.S. while further enhancing competition.

 

Furthermore, a combination would alleviate the long-standing issue of congestion in Chicago, which seized into gridlock in the winter of 2014 and hobbled economic growth. By channeling rail traffic away from Chicago, CP would create fluid routes through under-utilized hubs and free up much-needed capacity for other railroads that pass through the city, providing them with new, efficient and competitive service options for their own customers.

 

In short, a combined CP/NS would create capacity for all shippers without creating the need for more infrastructure.

 

An efficient end-to-end freight shipment solution will also improve safety, reduce highway congestion, and allow the rail industry to play an even greater role in the revival and sustained recovery of the North American economy.

 

CP hopes the NS executive leadership team and the Board of Directors give this offer due consideration, and looks forward to a thoughtful dialogue on creating a new industry leader.​