CP Deal now has Mr. B's interest after NS rejects CP

[calzephyr]

This article is on Yahoo business pages today. They tested the waters to purchase the CSX last year, right? I hope the NS is safe from a buyout.


Canadian Pacific explores Norfolk Southern takeover

34 minutes ago

(Recasts, changes sourcing, adds background on rail consolidation, updates share price moves)
By Greg Roumeliotis
NEW YORK, Nov 9 (Reuters) - Canadian Pacific Railway Ltd is exploring a potential acquisition of U.S. peer Norfolk Southern Corp, a person familiar with the matter said on Monday.
The two rail companies have held preliminary merger talks, but there is no certainty that negotiations will advance, the person added, asking not to be identified because the talks are confidential.
The discussions mark the Canadian railroad operator's second major consolidation play in little over a year, as it once again seeks to gain control of a railroad network that would give it access to the U.S. eastern seaboard and rail hubs like Chicago.
Norfolk Southern declined to comment. CP Rail in a release said it has "no material news pending at this time." The company added that it does not comment on market rumour and speculation.
Bloomberg, citing two people familiar with the matter, said earlier on Monday that Canada's No. 2 rail operator CP Rail is trying to raise financing to buy Norfolk Southern in a deal that would be worth over $24 billion. (http://bloom.bg/1ScVTK4)
CP Rail's Chief Executive Hunter Harrison has long contended that a creating a new transcontinental rail network could help improve congestion around Chicago, where east- and west-based railways meet and hand off cargo, a process that can take days.
The Canadian company's talks with CSX Corp, which also owns a large network across the Eastern U.S. failed last year.
Investors cheered news of a potential tie-up, sending shares of Norfolk Southern up 11 percent to $88.62 on the NYSE, while CP Rail's stock closed up 5.7 percent at C$188.79 on the TSX.
"I think it would be great, there's little overlap in terms of footprint," said John Stephenson, president of Stephenson & Co Capital Management. "I think it's potentially an attractive deal."
As in the case of the CSX deal, analysts warned there could be some hurdles around any deal with Norfolk Southern.
"All in a transaction may make quite a bit of operational and financial sense, but there are two major uncertainties," said RBC analyst John Barnes in a note to clients.
Barnes noted U.S. regulators would have to sign off on a foreign company owning a strategic asset, like a railroad and that CP would also need to win approval from the U.S. Surface Transportation Board that reviews such deals.
He said despite minimal geographic overlap, shippers would likely oppose any deal due to concerns over service and pricing.
(Additional reporting by Euan Rocha in Toronto and Manish Parashar in Bengaluru; Editing by Sriraj Kalluvila, Anil D'Silva and Bernard Orr)

[atsfan]

"Canadian Southern"

[fr8kar]

Southern Pacific.

[Spikre]

CP Rail is boxed into a corner.
why would NS sell to them after getting screwed on the
D&H Sale ?
but these are "Intresting Times"
why didn't CP jump into the CR Sale when they had that chance ?
Spikre

[Amboy Secondary]

Nov 10, 2015 14:53:47 GMT -8 Spikre said:

CP Rail is boxed into a corner.
why would NS sell to them after getting screwed on the
D&H Sale ?
but these are "Intresting Times"
why didn't CP jump into the CR Sale when they had that chance ?
Spikre

For sure, they didn't have the cash then. But you are right, these are "Interesting Times" and anything is possible. I never thought I would ever see Conrail split up either.

[wsor]

I believe CP and NS are the two main owners of the Harbor, so there is their route though Chicago. As for the rest, I feel it is just EHH trying to build an empire before he retires. The best fitting railroad to purchase would be KCS, but they seem unwilling to sell.

CP doesn't really have that kind of cash either. Buffet might, though, and adding NS to BNSF would save on trying to come up with a new name. Wouldn't have to answer to as many pesky shareholders either.

[calzephyr]

Nov 10, 2015 20:33:17 GMT -8 wsor said:

I believe CP and NS are the two main owners of the Harbor, so there is their route though Chicago. As for the rest, I feel it is just EHH trying to build an empire before he retires. The best fitting railroad to purchase would be KCS, but they seem unwilling to sell.

CP doesn't really have that kind of cash either. Buffet might, though, and adding NS to BNSF would save on trying to come up with a new name. Wouldn't have to answer to as many pesky shareholders either.

The deal would face many problems even if they had the cash.

The article below sort of makes the case it is a no starter for several reasons.



CP railway’s merger faces challenging agency


Canadian Pacific Railway's quest for a record merger depends on a blessing from the same U.S. agency that thwarted the last effort to build a transcontinental railroad.
Chief Executive Hunter Harrison's target, people familiar with the matter said, is Norfolk Southern Corp., the No. 2 carrier in the eastern United States. Both companies rallied Monday on news of Canadian Pacific's interest as investors savored the possible efficiencies in a coast-to-coast operation.
Getting to that point won't be easy.
First, Canadian Pacific would have to secure Norfolk Southern's consent. Then Harrison would have to win clearance from the U.S. Surface Transportation Board, which balked at a major cross-border tie- up in 2000 and has long been seen as opposed to more consolidation in an already shrunken North American industry.

The hurdles are very high," said Mark Levin, an analyst with BB&T Capital Markets. "I don't think you can accomplish a hostile merger in this environment."
Congress's railroad deregulation in 1980 unleashed two decades of deals that cut the ranks of U.S. carriers to four large ones from about 20, alongside Canadian Pacific and Canadian National Railway Co.
The tipping point came when BNSF Railway Co.'s former parent tried to combine with Canadian National: The STB imposed a 15-month merger moratorium followed by an additional review, and the companies dropped the idea.
Shippers complaining about rising rates spurred the STB to act — and since then, railroads have been reluctant to press for a final, blockbuster-consolidation push of the kind now being considered by Canadian Pacific.
"There is always a segment of the customers that want to re-regulate the industry," said Tony Hatch, who tracked many of the 1990s mergers as a Wall Street analyst and now runs ABH Consulting. "This would open that up."
The Surface Transportation Board had no comment Monday on the prospects of a Canadian Pacific-Norfolk Southern combination, spokesman Dennis Watson said. Neither did Calgary- based Canadian Pacific, whose market value of $22.9 billion is smaller than Norfolk Southern's $26.5 billion.
While Norfolk Southern also stayed silent Monday, the railroad's incoming chief executive officer wasn't hesitant to scoff about consolidation during a Sanford C. Bernstein & Co. conference in May.
"It would be fraught with risk, risk of open access, impositions, other conditions that would detract from the economics of the industry today," Jim Squires said at the event before his planned elevation to CEO on June 1. "The risks associated with bringing a merger to the STB are very significant."
Canadian Pacific's interest in a merged railroad stretching from the Pacific port of Vancouver to the East Coast bubbled to the surface more than a year ago, in talks with CSX Corp. that ultimately went nowhere. CSX competes with Norfolk, Virginia-based Norfolk Southern in the eastern U.S., so the benefits -- and pitfalls -- would be similar.
"Everybody has to be on the same page on the railroad side and be able to sell the benefits of this to shippers because they're going to be potentially nervous," said David Tyerman, an analyst with Canaccord Genuity Inc.
With the U.S. in the middle of a presidential election campaign, the timing also couldn't be worse for a foreign buyer, Tyerman said. Candidates could whip up public opinion against the deal that might influence regulators.
The three members of the Surface Transportation Board are presidential appointees, and the agency is no stranger to political pressure.
When Union Pacific Corp.'s $5.4 billion acquisition of Southern Pacific Rail Corp. spawned freight logjams in 1997 and 1998, some lawmakers scolded the STB about balancing railroad and shipper needs.
"The mergers in the '90s were extremely useful and helped create a stronger industry, but they were also extremely painful," Hatch said. Regulators may be unwilling to risk the disruption to the industry for less of a payback, he said.

[leikec]

The stock bumped up about 11% on the news--but I doubt very much it will stay there for long. Might be a great time to short NSC.

Jeff C

[Spikre]

Canadian Pacific seems about as Delusional as some Sports Fans
were recently.
think the people that work at NS needed a good laff,and this CP
proposal surely should provide several big ones.
whats in the Water in Winnapeg anyway ?
CP is way too isolated out there,they should move to Toronto and
see how real people live.
Spikre

[fr8kar]

It would certainly be interesting integrating the operating agreements for the TY&E people. NS has some of the most poorly equipped locomotives out there (in terms of creature comforts) and CP some of the best. Neither seems interested in maintaining them, so they have that in common at least.

[atsfan]

First, NEVER say never on these things. Anything can happen. Small, large, doesn't matter.
And CP doesn't need "cash". Not a penny. Just issue stock and the funds will arrive.

And NS execs and board will sell in a heartbeat when the price is right. Money talks and execs walk (with nice golden packages). Institutional investors will sell also for the right $. They all don't care a lick about anything other than money.

Not to say this will happen. But don't say it won't, or can't. "Should" is another matter altogether.

[calzephyr]

Nov 12, 2015 14:52:31 GMT -8 atsfan said:

First, NEVER say never on these things. Anything can happen. Small, large, doesn't matter.
And CP doesn't need "cash". Not a penny. Just issue stock and the funds will arrive.

And NS execs and board will sell in a heartbeat when the price is right. Money talks and execs walk (with nice golden packages). Institutional investors will sell also for the right $. They all don't care a lick about anything other than money.

Not to say this will happen. But don't say it won't, or can't. "Should" is another matter altogether.

True, buyouts can take place if the deal is right. My thought is that the Union Pacific would also be interested if this deal gets hot and looks to be a possibility.
Larry

[leikec]

Nov 12, 2015 14:52:31 GMT -8 atsfan said:

First, NEVER say never on these things. Anything can happen. Small, large, doesn't matter.
And CP doesn't need "cash". Not a penny. Just issue stock and the funds will arrive.

And NS execs and board will sell in a heartbeat when the price is right. Money talks and execs walk (with nice golden packages). Institutional investors will sell also for the right $. They all don't care a lick about anything other than money.

Not to say this will happen. But don't say it won't, or can't. "Should" is another matter altogether.

Never say never, but in this case "probably never" is a safe statement. I'd be very surprised if the STB would allow this merger to go forward.

Jeff C

[Spikre]

it would make more sense for NS to buy out CP.
but how often is these sort of things go on Logic ?
so we'll see how far CP gets,dont think it will
be too far,and the way NS attacked CSX with the
CR sale,CP may be prodding the wrong company .
Spikre

[atsfan]

Nov 13, 2015 7:54:55 GMT -8 leikec said:

Nov 12, 2015 14:52:31 GMT -8 atsfan said:

First, NEVER say never on these things. Anything can happen. Small, large, doesn't matter.
And CP doesn't need "cash". Not a penny. Just issue stock and the funds will arrive.

And NS execs and board will sell in a heartbeat when the price is right. Money talks and execs walk (with nice golden packages). Institutional investors will sell also for the right $. They all don't care a lick about anything other than money.

Not to say this will happen. But don't say it won't, or can't. "Should" is another matter altogether.

Never say never, but in this case "probably never" is a safe statement. I'd be very surprised if the STB would allow this merger to go forward.

Jeff C

The STB is open for campaign contributions.
Just like American and USAirways.
First the answer was no.
Checks were written. Dinners were bought. A few slots at Reagan given up and approved.

Never under estimate the power of money.

[kentuckysouthernrwy]

I think it all boils down to a language barrier between Canadians and Southerners. eh? y'all?

[bncascadegreen]

Be a joke for sure

[atsfan]

www.nscorp.com/content/nscorp/en/news/norfolk-southernboardofdirectorstoevaluateunsolicitedlowpremiumn.html

[Spikre]

am sure rite now that the NS BOD is seeing who can make
the best paper airplanes from papers provided by CP.
the CP Offer is ludicris.
Spikre

[curtmc]

With King Coal on the decline NS is not in the position they once were...
And all the cash they were flush with for decades went toward their having to get the largest slice of Conrail.

When the next round of "mergers" (either agreed or hostile) happen, NS is probably not going to be a "buyer", but instead end up a "buy-ee" ("bye-bye horsey")

PS. NS didn't close the yard in Roanoke because they are doing well... Think about what NS has done in Roanoke for a minute... Yeah, we hear about CSX is going to close Irwin and car shops in Corbin... but NS had already closed the yard in Roanoke... Yes, Roanoke... The city and HQ of Norfolk & Western, birthplace of the N&W steam fleet, and city once thought of being a railroad city the likes of Omaha and Altoona.

[valenciajim]

Curt--I concur with your analysis and conclusions.

[Spikre]

Curt,
it was about a year ago that NS agreed to pay about 10X what the D&H
was Worth,so they can raise CASH if needed.
a few Quarters of low Coal loadings may crimp the N&W side of NS,but
shouldn't really do much to the Southern side of NS,except keep the
Tracks more open for Intermodal,Auto,Grain,and other non Coal traffic.
NS is a Deep Organization,and they will ride out the Coal drought and
come back stronger.
CP doesn't have the Depth of Traffic that NS has,and likely never will.
as for KCS they should still be owned by an Industrial Conglamorate,they
haven't shown any interest in selling KCS yet,and don't think that will
change because of Lame CP "Saber Rattling" !!
but will be interesting to see what does transpire.
NS buying CSX would make more sense.
Spikre

[valenciajim]

spikre--how would and NS/CSX combination ever get through the anti-trust regulators?

[Spikre]

Jim,
maybe if NS Pledged to keep Oil trains on Track and stop
burning down towns and contaminating them,maybe they could
pull it off.
but since the STB isn't in a Monopoly Mode,they likely couldn't
now,but maybe after this CP thing vaporizes they could ?
and the U.S. doesn't seem to be into Coast To Coast tie ups,
even though BN + Frisco was,hard to predict what they will do
in Deee Ceee.
but recall that CSX was the Merger that took about 8 Winners
and made them second tier losers.
Spikre

[curtmc]

Raising cash is one thing (all RRs can do that) but traditionally NS was flush with cash...
Overstepping for CR and DH weakened them. That makes them a target...

All the money NS sank into the Heartland Corridor... what has that gotten them?
And the Roadrailler business that used to be thought of as a money tree... Why is that being scaled back?

[fr8kar]

Roadrailer isn't being scaled back so much as it is being transitioned to a traditional intermodal approach. This allows them to provide service at other companies' ramps in addition to or in lieu of their own and eliminates the need for their own specialized equipment.

[atsfan]

Nov 20, 2015 12:20:08 GMT -8 curtmc said:

With King Coal on the decline NS is not in the position they once were...
And all the cash they were flush with for decades went toward their having to get the largest slice of Conrail.

When the next round of "mergers" (either agreed or hostile) happen, NS is probably not going to be a "buyer", but instead end up a "buy-ee" ("bye-bye horsey")

PS. NS didn't close the yard in Roanoke because they are doing well... Think about what NS has done in Roanoke for a minute... Yeah, we hear about CSX is going to close Irwin and car shops in Corbin... but NS had already closed the yard in Roanoke... Yes, Roanoke... The city and HQ of Norfolk & Western, birthplace of the N&W steam fleet, and city once thought of being a railroad city the likes of Omaha and Altoona.

Closing Roanoke does not mean things are bad with NS. They have Altoona. Conrail closed Marion Ohio. Other major railroad towns have closed up. Railroads have been cutting back expensive facilities for decades.

[Spikre]

found this bit of CP news in 2/12 Trains last nite,page 10:
Fund Buys Into CP.
an Activist{Crook Fund}NYC based Investment Fund has bought into CP,
"Pershing Square Capitol Management" owned 12% of CP at the end of
October 2012.
Boss William Ackman has met with CP's Top Management.
the RR {CP Rail} has been the POOREST Performer of the 7 Class 1
Roads over the Past few Years.
Ackman has a History of buying into Companies and trying to Force
management changes.
so is this just a "Leveraged Buyout type Scam CP is trying to Pull
Off here ??
and if Trains reports that CP Rail is Very Lame,they are likely even
worse than that.
any other thoughts on this Scam now ?
Spikre

[valenciajim]

I pity CP if Ackman is buying into them. His track record is spotty. He likes to bully the crap out of management. Ackman is a hedge fund guy, not a private equity guy. The private equity folks are the ones who use a lot of debt to acquire companies in what is sometimes referred to as a leverage buyout. Ackman's game is to force management into either (i) paying a large dividend to shareholders or (ii) taking actions which will drive up the stock price short term. In bull markets he does very well, but he does not do as well when the markets move sideways or down.

The other problem with CP is that its business is largely denominated in Canadian dollars, which means it is going to be very expensive for them to purchase assets that are denominated in US dollars. Given the current regulatory environment, I think this merger is a long shot anyway.

[Spikre]

Jim,
if I'm understanding this correctly,Ackman convinced CP to bring in
Harrison.
so Harrison does all sorts of cost cutting to make CP look better on
Paper,but really hasn't grown real Traffic that much.
Harrison has a free run from both Ackman and CP to do whatever He wants
to do as long as it works.
so far NS isn't Impressed with the CP offer,but that could change if
more Money shows up.
time is on NS's side though,CP is holding its breath,but will have to
Exhale eventually.
Spikre