Norfolk Southern urges shareholders to oppose CP proxy

Canadian Pacific filed a definitive proxy statement asking the NS board of directors to “engage in good faith discussions” with CP regarding a potential purchase that will be voted on at the annual NS shareholder meeting May 12.    Canadian Pacific Railway is continuing its dogged pursuit of acquiring number four United States railroad Norfolk Southern Corp. despite strong opposition from NS.
   NS earlier this week set the date for its annual shareholder meeting for May 12 in a regulatory filing with the U.S. Securities and Exchange Commission (SEC). Also contained in the SEC filing was a letter addressed to NS employees and shareholders urging them to vote down a proxy statement from CP regarding the potential purchase.
   In the letter, NS CEO Jim Squires said the company has made “substantial headway” in its five-year strategic plan announced in December to streamline operations, drive profitability, and accelerate growth. The plan, according to Squires, “balances revenue growth through pricing and volume and a variety of expense reduction and cost control initiatives.”
   “We expect to achieve annual productivity savings of more than $650 million per year by 2020, growing from an initial $130 million in 2016,” he said.
   “Among other actions, we announced the consolidation of our Virginia and Pocahontas divisions to form the new Pocahontas Division in Roanoke, the consolidation of three operating regions into two in order to drive down costs. These decisions have come in addition to the previous restructuring of the Triple Crown Services subsidiary, integration of the D&H South acquisition, and line and facility rationalizations,” added Squires.
   NS has since last November rejected three separate cash-and-stock offers from CP valued at around $30 billion. The company has argued the NS bids were “grossly inadequate” and unlikely to win regulatory approval from the U.S. Surface Transportation Board, but CP has continued the highly publicized takeover attempt undeterred.
   Yesterday CP said in a press release it has filed the definitive proxy statement for an NS shareholder resolution to be discussed at the annual meeting. The Calgary-based railway noted the resolution does not require shareholder to vote on the merits of the acquisition itself, only to ask the NS board of directors to “engage in good faith discussions with CP regarding a business combination.”
   CP said it also filed a letter to all NS shareholders about the “opportunity to create significant value” through the proposed merger.
   “Employees who own NS shares should pay attention to an item that appears in the proxy statement that you will soon receive for the May 12 Annual Meeting. In connection with its unsolicited takeover campaign of NS, Canadian Pacific submitted a shareholder resolution that asks NS to engage in ‘good faith discussions’ with CP regarding a potential business combination,” Squires wrote in the letter. “The NS Board recommends that shareholders use the Company’s WHITE proxy card to vote AGAINST the CP resolution (for more information see the Statement of Opposition in the Company’s 2016 proxy statement).”
   For its part, CP said that in filing its own definitive proxy statement on March 28, NS stated, “[The] Shareholder Proposal from Canadian Pacific is Unnecessary Because Norfolk Southern Would Have Discussions with CP if it Obtains a Declaratory Order and States a Willingness to Meaningfully Increase its Offer.”
    “CP has consistently stated that we are open to discussing all terms of a potential deal, including price, but we can’t negotiate with ourselves,” said CP CEO E. Hunter Harrison. “Given we have also asked the Surface Transportation Board for a declaratory order on the voting trust model we were pleased to hear that Norfolk Southern may now be willing to engage in direct face-to-face discussions.”
   CP said it has “demonstrated from the beginning that it is flexible on price, having improved its offer twice already, and shown flexibility on the structure of a potential combination, offering a voting trust structure as the quickest way for NS shareholders to receive consideration for their shares,” adding that the voting trust is not a condition to its offer.
   “NS shareholders have been telling CP from the beginning that their own board should, at the very least, talk to CP about a potential combination,” the railway said. 
   “The NS board has refused to meet with us in the past, which ultimately led to our shareholder resolution,” added Harrison. “While we remain open to meeting with them anytime and anywhere, we are putting the question to the shareholders of NS so they can finally be heard.”