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  • DATVF.CHIATL
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  • DATVF.VSU
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  • DATVF.VWU
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  • ITVI.USA
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  • OTVI.USA
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  • TLT.USA
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  • WAIT.USA
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  • DATVF.ATLPHL
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  • DATVF.CHIATL
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  • DATVF.DALLAX
    0.916
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  • DATVF.LAXDAL
    1.446
    -0.049
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  • DATVF.SEALAX
    1.006
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  • DATVF.PHLCHI
    1.069
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  • DATVF.LAXSEA
    2.100
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  • DATVF.VEU
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  • DATVF.VNU
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  • DATVF.VSU
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  • DATVF.VWU
    1.553
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  • ITVI.USA
    9,385.190
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  • OTRI.USA
    6.800
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  • OTVI.USA
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  • TLT.USA
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  • WAIT.USA
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American Shipper

Norfolk Southern: CP’s latest bid still inadequate

Canadian Pacific’s latest attempt to buy rival Norfolk Southern hasn’t swayed executives of the Virginia-based railroad, which said it still doubts the deal would pass regulatory review regardless of the offer’s value.

   The board of directors of Norfolk Southern on Wednesday once again decried as “grossly inadequate” a third takeover proposal from rival railroad Canadian Pacific.
   The latest attempt by CP to acquire NS was publicly disclosed Dec. 16, but, according to NS, was not directly communicated to the Virginia-based railroad. In a letter to CP Chief Executive Officer Hunter Harrison, NS Chairman, President and CEO Jim Squires said the proposal had not only failed to adequately value his company, but that CP also failed to “addressed the significant regulatory issues that we have previously identified.”
   NS has said repeatedly it believes such a massive merger would not pass regulatory review by the Surface Transportation Board.
   “Our view reflects careful analysis by our regulatory experts and is fully supported by two former Surface Transportation Board Commissioners,” Squires wrote. “You have a path to seek a declaratory order from the STB as to whether the voting trust structure that you proposed could work. The STB has clear, statutorily-established authority to issue declaratory orders to remove uncertainty, and there is precedent for it in the voting trust context.
   “No involvement by Norfolk Southern is required for you to seek a declaratory order regarding the legality of putting Canadian Pacific into a voting trust under your proposed structure,” he added. “Your decision not to seek an order shows a lack of confidence in your proposed structure”
   CP’s latest proposal includes a so-called contingent value right, a type of option issued by the buyer of a company to the sellers that, if triggered, lets the sellers acquire more shares in the target company.
   In rejecting the third offer, Squires wrote that the deal would not be in the best interest of the company and its shareholders “even if the CVR had a value at the high end of the range suggested in your publicly filed presentation.”
   “In fact,” he said, “our financial advisors believe that the CVR would trade at a significant discount.”
   Squires also addressed Harrison’s assertion that NS has been unwilling to substantively discuss a deal.
   “You continue to publicly declare that we are not ‘engaging’ or ‘meeting’ with you,” he wrote. “There is no basis to meet until you both make a compelling offer and address the regulatory issues, which you have the ability to do by seeking a declaratory order. We also note your repeated public statements that you are not willing to increase your offer regardless of whether we were to meet.”
   The investment bank Stifel said in a investor note last week that CP “is clearly going the propaganda route to push their agenda, with this being their third call in a short period of time.”
   “CP and (and hedge fund management company) Pershing Square have made significant effort to inform the investor community about their current thinking (or at least their public story) regarding this potential transaction,” the firm said. “Our view, however, is that the major barrier to this transaction remains approval from the Surface Transportation Board, which is completely independent of whatever the sell-side and buy-side seem to think about such a deal.”
   Stifel said the CVR is Pershing Square’s attempt to “confuse investors into thinking this offer is the right way to go.”
   “There are now more assumptions in this model than were in the previous model, which we simply view as making this deal less friendly to its receivers who are already opposed to said proposal,” it added. “The bottom line is we don’t think trying to confuse investors is the best way to try and push what is increasingly becoming a controversial deal.”

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