MONTREAL – Canadian Pacific Railway is still awaiting a response from Norfolk Southern to its US$28-billion merger proposal, but the Canadian company’s CEO says it is getting positive feedback from shareholders and shippers.
“Most of the shareholders I’ve talked to think its a powerful combo,” Hunter Harrison told the Credit Suisse Industrials conference webcast from Florida.
Harrison also described the feedback from shippers as “encouraging.”
The Calgary-based railway has been expected to face opposition from shippers, unions and other railways.
Aside from complaints by railway rivals, Harrison said he’s “very pleased with where we are.”
The veteran railroader who headed Canadian National Railway (TSX:CNR) before being lured out of retirement by CP Rail (TSX:CP) said he can’t see other railways crying foul given the accommodations it has proposed to give them access to its network if customers are unhappy with the service provided.
“This is about competition,” Harrison said, adding he doesn’t see BNSF owner Warren Buffett of Berkshire Hathaway lobbying against the deal.
“I just can’t imagine Mr. Buffett going to Washington saying help me, these Canadians are coming in here and doing all these ugly things to us.”
Meanwhile, Harrison told the conference that most of the US$1.8 billion in planned cost savings under the deal would come from improving operations at Norfolk Southern, including eliminating positions mainly through attrition.
He said CP cut nearly one-third of its workforce, almost entirely without layoffs.
Harrison described CP’s proposal of a holding trust that would allow the two railways to initially operate autonomously as the simplest option.
CP (TSX:CP) presented a 50-50 stock-and-cash offer Nov. 18 that would give U.S.-based Norfolk Southern shareholders US$46.72 in cash and 0.348 of a share in the new merged company for each share they hold.
That would see Norfolk Southern shareholders own a 41 per cent stake in the combined company, which would be listed on both the New York and Toronto Stock Exchanges.
Norfolk Southern gave a cool initial response to the takeover proposal, describing it as an “unsolicited, low-premium, non-binding, highly conditional indication of interest.”