OMAHA, Neb. – Canadian Pacific’s appeal to Norfolk Southern shareholders and regulators likely represents the railroad’s last effort to acquire its rival.
Norfolk Southern shareholders will vote this spring on whether the two railroads should discuss a merger, although the date of the railroad’s annual meeting hasn’t been set. The company has sternly rejected several offers worth roughly $30 billion.
Canadian Pacific CEO Hunter Harrison said he still hopes the appeal to shareholders will prod Norfolk Southern executives to sit down and discuss a merger. He doesn’t plan a hostile takeover, he said Wednesday at a J.P. Morgan investor conference.
“We want this to happen. This is kind of our last effort, the last thing we know to do and we hope it will work,” Harrison said. “And if not we are going to go back in and run our railroad.”
Harrison said he also talked briefly with CSX railroad recently about merger possibilities, but he never made an offer to buy that railroad.
Canadian Pacific officials have said they believe combining with Norfolk Southern would create a more efficient operation that could move more freight without adding tracks while eliminating about $1.8 billion in annual costs.
Norfolk Southern has said that it doesn’t believe merger discussions are warranted unless Canadian Pacific increases its offer price and persuades the U.S. Surface Transportation Board to approve the proposed structure of the deal.
The proposed structure calls for setting up a voting trust to oversee both railroads and installing Harrison as CEO of Norfolk Southern while regulators review the deal.
Norfolk Southern believes that would violate a prohibition against an acquiring railroad taking control of its target before a deal is approved.
Norfolk Southern has said investors would be better off with its plan to cut $130 million in costs this year and eliminate $650 million in annual spending by 2020 while improving service.