Norfolk Southern said in a statement it is better off sticking with its existing strategy, adding that it thinks a merger of that size would have faced slim odds of being approved by regulators.
Norfolk Southern’s board of directors has unanimously rejected an acquisition proposal from Canadian Pacific as not in the best interest of the company and its shareholders, according to a statement from the company Friday.
NS called the 50/50 cash and stock proposal to acquire the company for $46.72 per share and a fixed exchange ratio of 0.348 shares in a new combined company that would own both CP and NS “grossly inadequate,” and one that “creates substantial regulatory risks and uncertainties that are highly unlikely to be overcome.”
“We believe in our ability to generate greater shareholder value through execution of our strategy – delivering efficient and superior service to build a more profitable franchise based on price and volume growth, implementing efficiency measures, and increasing returns on capital to strengthen our financial performance, all while maintaining our disciplined capital return strategy,” said NS Chairman, President and CEO James A. Squires.
“There is a high probability that, after years of disruption and expense, the proposed combination would be rejected by the Surface Transportation Board,” the body that regulates U.S. railroads, added Squires.
“We believe that Canadian Pacific’s short-term, cut-to-the-bone strategy could cause Norfolk Southern to lose substantial revenues from our service-sensitive customer base,” he said. “We also believe the proposed transaction risks harm to vital transportation infrastructure and the communities we serve. Any strategy that hurts our customers and the broader community is highly unlikely to receive regulatory approval and is inconsistent with the delivery of shareholder value over the long-term.”
NS said a deal would actually worsen, not help rail congestion in the Chicago area, which was one the supposed benefits of a merger touted by CP in its very public offer to acquire the Norfolk, Va.-based railway.
NS rejects acquisition offer from Canadian Pacific
