Newspaper article Charleston Gazette Mail

Railway Takes Takeover Case to Shareholders

Newspaper article Charleston Gazette Mail

Railway Takes Takeover Case to Shareholders

Article excerpt

Canadian Pacific Railway Ltd. and its activist backer Bill Ackman appealed directly to Norfolk Southern Corp.'s shareholders, urging them to support its sweetened takeover offer or risk getting nothing. Hunter Harrison, Canadian Pacific's chief executive officer, said he has no qualms about taking its revised bid to a proxy fight if the U.S. company's shareholders support the deal against the wishes of the Norfolk Southern board.

"If this is going to be a street fight, so be it, Harrison said Wednesday on a conference call.

Canadian Pacific's proposal now includes a contingent-value right that provides Norfolk Southern investors an extra payout of as much as $25 a share, or an additional value of up to $3.4 billion, on top of the existing cash-and-stock offer that values Norfolk Southern at about $27 billion.

Harrison, 71, said he believes a proxy fight is likely if Norfolk Southern's management and board continue to refuse to discuss a takeover. He wants to create a transcontinental carrier by merging Canada's second-largest railroad with the No. 2 operator in the eastern U.S. The combination would create the third-largest North American railway by revenue.

"Guys who are holding out for CP to come up with a much higher cash offer or share offer probably are going to be disappointed, said David Vernon, an analyst with Sanford C. Bernstein. "It certainly sounds like this is a very fair offer from their perspective.

Harrison appealed directly to Norfolk Southern's shareholders Wednesday.

"If they're not going to come to the table and they're not going to talk, and they're not going to enter a dialogue with us, then the only way it's going to happen is if you show support for this transaction, he said on the call. "If you don't want it to happen, all you have to do is tell us. It's up to you.

Ackman urged investors to do the math and make their opinions known to Norfolk Southern's board and its lead director. The revised proposal is as good as it gets short of anything that might come out of a negotiation, he said.

"Hunter's done. OK? I got that message from him, Ackman said on the call.

Ackman said the entrenched board and management at Norfolk Southern were similar to the one at Canadian Pacific before his Pershing Square Capital Management led a proxy battle there in 2012 that eventually saw Harrison installed as CEO.

The simplest way for Norfolk Southern shareholders to support the takeover bid would be to push for a resolution at the next general meeting saying that the board should engage with Canadian Pacific, Ackman said. Proxy material for Norfolk Southern's annual meeting next year would have to be submitted by Feb. 14, he said.

"The more aggressive way, of course, is for a shareholder to propose a replacement slate of directors, Ackman said.

Norfolk Southern said in a statement it would consider the latest proposal. …

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