CP threatens to take ‘anti-competition’ concerns to court

Meanwhile, shares of CSX saw a bump this week on rumors that Canadian Pacific in January made an offer to purchase the U.S. Class I railway amid its highly public, and thus far unsuccessful, takeover attempt of Norfolk Southern.    Canadian Pacific Railway could take some of the major Class I United States railroads to court over what it calls “anti-competitive actions,” according to a statement from the company.
   CP has since November been involved in a highly public, and thus far unsuccessful, takeover attempt of number four U.S. railroad Norfolk Southern Corp. NS has rejected three separate cash-and-stock purchase offers valued at around $30 billion on the grounds that the bids undervalue the company and are unlikely to win regulatory approval from the U.S. Surface Transportation Board (STB).
   The Calgary-based railway said earlier this week the proposed takeover is being met with “overwhelming support” from its customers, but several groups, including other Class I railroads like CSX Corp., Union Pacific Corp. and BNSF Railway, members of Congress, rail unions, NS customers, and even parcel giant UPS – CP’s largest intermodal shipper – have previously spoken out against the deal.
   CP also announced yesterday it has sent a petition to the STB asking for a declaratory order confirming the viability of a proposed voting trust structure the company has suggested as part of the acquisition.
   “Shareholders of both CP and NS have asked that we seek this declaratory order as a means to better understand the STB’s views on the proposed voting trust model ahead of any formal application and we have listened to the owners of our respective companies,” Chief Executive Officer E. Hunter Harrison said in a statement. “Since we remain convinced that productive discussions about the potential structure and value of a formal bid must take place face to face we hope this show of good faith is met with an equal demonstration on the part of NS.”
   The railway earlier this month submitted a non-binding resolution urging NS shareholders to ask the company’s board of directors to engage in negotiations with CP and informed voters of its intention to seek a declaratory order from the STB.
   “While the declaratory order presents a hypothetical proposed trust – outside the established STB procedure for seeking formal trust approval – CP is hopeful that the STB will be able to offer clarity that will allow shareholders to make an informed decision on CP’s pending resolution,” CP said.
   For its part, Norfolk Southern has been actively cutting costs in an attempt to stave off CP’s repeated advances. NS announced Tuesday it will consolidate its three operating regions into two as part of five-year strategic plan released in December designed to slash expenses $650 million per year by 2020 and accelerate profit growth.
   CP said it is “considering all of its legal options in response to recent actions by a number of major U.S. railroads who have stated publicly they are working collectively to block CP’s efforts to pursue a pro-customer, competition-enhancing combination with Norfolk Southern Corp. (NS).”
   “It is unfortunate that CP must consider the use of litigation to ensure a level playing field and protect its rights, but the company has concluded that the actions of those competitors should not be allowed to block the creation of a railroad that offers unparalleled customer service and competitive rates that will support the success of the shippers, the industries it serves and the broader economy,” the company added.
   CP did not specify in its remarks what precise legal actions it might take or against which specific railroads.
   Meanwhile, shares in NS rival railroad CSX Transportation saw a bump this week on rumors that CP in January made an offer to purchase the east coast railway.
   According to a report in the Wall Street Journal, CSX rejected the latest offer (CP made a previous attempt to purchase CSX in 2014), but CP’s CEO remains determined to build a transcontinental railroad. Although Harrison said he is committed to its bid for Norfolk Southern, the company is keeping its options open.
   “We’ve said all along that if we looked at the synergies between the two eastern carriers, right now both of them would work for us,” he reportedly told WSJ.
   Following the report, stock in CSX jumped 2.1 percent on Tuesday, from $24.14 per share at close of trading Monday to $24.64 per share at Tuesday’s close. Shares continued to climb Wednesday, reaching a peak of $25.40 around 1:10 p.m. before settling back in at $24.55 by market close.