- Associated Press - Friday, December 4, 2015

NORFOLK, Va. (AP) - Norfolk Southern has rejected Canadian Pacific’s cash-and-stock proposal to combine the two railroads, saying the offer is inadequate and has regulatory risks.

Last month Canadian Pacific offered more than $28 billion for Norfolk Southern. Canadian Pacific said Friday that it disagrees with Norfolk Southern’s “mischaracterization” of the offer and is “committed to this transaction.”

Norfolk Southern Corp. had said earlier Friday that its board determined the proposal had “regulatory risks and uncertainties that are highly unlikely to be overcome.”

In a letter sent to Canadian Pacific CEO E. Hunter Harrison and Chairman Andrew Reardon, Norfolk Southern said that it felt the regulatory review process for the proposed deal would take two years or more, with a very low likelihood of approval. Even if it were approved, Norfolk Southern said it would be “in limbo” for that time period, disrupting its operations.

Federal regulators haven’t approved any major railroad mergers in more than 15 years. One of the only major deals in recent years is when Warren Buffett’s Berkshire Hathaway conglomerate bought BNSF railroad in 2010.

Shares of Norfolk Southern dropped $1.05 to $92.06, while Canadian Pacific Railway Ltd.’s stock fell $6.42, or 4.6 percent, to $134.49.

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