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CP Rail CEO prepared to walk away from Norfolk merger if shareholders vote no

MONTREAL – Canadian Pacific Railway CEO Hunter Harrison says he’s prepared to walk away from a takeover bid for Norfolk Southern if the U.S. railway’s shareholders don’t vote to urge its board to enter into negotiations.

“We’re making preparations that, if we’re not successful in entering a dialogue, that we’re going to go back and focus on running a hell of a CP railroad and making it even more successful and having a good year and rewarding shareholders,” Harrison said Wednesday during an investor conference webcast from Florida.

It’s not the first time Harrison has suggested ending the three-month merger pursuit. A couple of weeks ago he mused about abandoning the bid and instead focusing on repurchasing CP shares, which have fallen 35 per cent in the last year.

The veteran railway executive said he’s not sure if the odds are high that shareholders would agree to its request to vote yes at the next annual meeting, but he said CP Rail’s (TSX:CP) options are narrowing.

“The list is becoming shorter and shorter to try to see this thing through and make it successful.”

Harrison said some people misinterpreted prior comments about taking the proposal directly to shareholders as a proxy battle. He said such moves are costly and don’t create the right environment.

He described CP’s current call for a non-binding vote as reasonable because it merely urges the board to enter into talks rather than weigh in on the existing proposal.

Norfolk Southern has steadfastly refused to enter into negotiations on CP’s US$30-billion offer. It responded Tuesday evening to the shareholder vote idea by saying it had already met with CP and that further discussions were not in the best interests of its shareholders unless its suitor offers “compelling value and addresses the regulatory issues inherent in its proposal.”

Harrison said he was disappointed by the response, saying there had been only one two-hour meeting between himself and Norfolk’s chairman.