Canadian Pacific’s chief executive said Thursday he remains optimistic about completing a merger with Norfolk Southern but executives at the Virginia-based railroad haven’t been willing to discuss the idea at length.
Canadian Pacific CEO Hunter Harrison said he talked with Norfolk Southern’s CEO James Squires for about two hours before announcing his company’s cash and stock offer earlier this week.
Harrison said he thinks the two railroads could reach an agreement if they would discuss their issues, and he’s not set on where the combined company would be based or who would lead it.
“We’re trying to take these two franchises — that we think are good and have a lot of potential — and create some type of partnership that enhances shareholder value,” he said at a UBS investment conference in Boca Raton, Florida.
Combining Canadian Pacific and Norfolk Southern could create a more efficient railroad that would link major ports, and the two railroads don’t have much overlap now, Harrison said.
Norfolk Southern, which is based in Norfolk, Virginia, reacted coolly to Canadian Pacific’s initial offer of $46.72 cash and 0.348 shares in the combined company.
The railroad said that offer represented a premium of less than 10 per cent on its stock price Tuesday, but rumours of deal talks a week earlier had sent Norfolk Southern’s stock soaring. Spokeswoman Susan Terpay declined to comment Thursday.
Norfolk Southern’s stock has gained 21 per cent, or $16.98, since Nov. 6 to close at $96.85 Thursday.
Harrison said shareholders will be the ones who decide whether the deal moves forward, but he hopes he’ll get a chance to sit down with Norfolk Southern executives.
“It’s hard to resolve issues if you don’t talk,” Harrison said.
No major railroad mergers have been completed since federal regulators imposed tough restrictions on them in 2001. So even if the two railroads can agree on terms, a deal still might fail.