Canadian Pacific’s (CP) CEO Says “I’ve Got a Selling Job to Do”
Shares of Canadian Pacific closed at $125.70, down -3.38 or -2.62 percent in Thursday’s regular trading session after Bloomberg conducted an interview with Chief Executive Officer Hunter Harrison yesterday. Harrison said that he is facing an uphill battle in convincing not only Norfolk Southern Corp. (NSC), but also CSX Corp. (CSX) of the advantages of merging with the Canadian railway.
Calgary, Alberta based Canadian Pacific Railway Limited is the operator of the Canadian Pacific Railway, which was founded in 1881 and is the second largest railroad in Canada.
Norfolk, Virginia based Norfolk Southern Corporation is the holding company for the Norfolk Southern Railway, the second largest railway in the eastern United States. The Railway was completed in 1894 and was known as the Southern Railway. The company operates 20,000 route miles in 22 United States and the District of Columbia. Norfolk Southern offers service to every major eastern seaport including nine lake ports and 10 river ports with the most extensive intermodal railway network in the Eastern United States.
Jacksonville, Florida based CSX Corp. is a holding company focusing on North American railroads and real estate. The company is the result of the 1980 merger of Chessie System and Seaboard Coast Line Industries, which with the merger of other railroads became CSX Transportation. The company’s subsidiaries include CSX de Mexico, CSX Real Property, CSX Technology and Fruit Growers Express among others.
In a Bloomberg TV interview on Thursday, Canadian Pacific Chief Executive Hunter Harrison said that neither of the two railroads, CSX or Norfolk Southern think that they would be a good fit to merge with Canadian Pacific and “So I’ve got a selling job to do if we’re going to make this successful”.
Norfolk Southern rejected three offers from Canadian Pacific with the latest bid for $27 billion in December. Norfolk Southern said the offer was “grossly inadequate” and could be blocked by regulators. Harrison said that, “We made an offer with Norfolk Southern with a letter, a pretty extensive offer, a four- or five-page letter. Maybe we should have gone in and shaken hands, sat down and just talked first. Maybe their impression was that we were trying to back them into a corner. It was not our intent.”
On March 1st, news broke that Canadian Pacific had approached CSX again after having been rebuffed by CSX for a merger in 2014. On Wednesday, Harrison said at the J.P. Morgan Aviation, Transportation & Industrials Conference in New York that “We met with CSX for an hour and a half,” adding that, “now I hope you know me well enough to know that I'm not going to sit with someone for an hour and a half and make an offer in the dark.”
Canadian Pacific is now offering a proposal to Norfolk Southern shareholders at Norfolk’s annual shareholder meeting, asking for their board of directors to engage in “good faith” discussions. If the resolution is rejected, then Canadian Pacific will end its efforts for a merger, Harrison said “Presently this is kind of our last effort, the last thing we know to do and we hope it will work. If not we're going to go back and run our railroad.”
Other News About CP
CP and City of Vancouver agree to sale of Arbutus Corridor
CP will sell the Arbutus Corridor to Vancouver for $55 million.
CP files preliminary proxy statement with SEC for Norfolk Southern Annual Meeting
According to CEO Harrison, this is CP’s last attempt at a merger with NSC.
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