Reuters — U.S. railroad operator Norfolk Southern has formally rejected a revised offer from Canadian Pacific Railway (CP), raising the prospect of a proxy battle.
CP shareholder Bill Ackman said last week that CP CEO Hunter Harrison and he have both been sounded out by activists interested in a proxy fight with Norfolk Southern.
Ackman and Harrison also said if necessary they will take the proposed merger directly to shareholders.
Ackman’s hedge fund, Pershing Square Capital Management, holds 9.12 per cent of CP, according to Thomson Reuters data.
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Norfolk Southern said Monday the revised offer was worth less than CP’s earlier proposal.
The revised offer valued Norfolk Southern at $88.52 per share, based on CP stock’s closing price on Friday, Norfolk Southern said (all figures US$).
At that price, the revised offer valued Norfolk Southern at $26.8 billion. CP’s original proposal was worth $28.4 billion.
CP’s proposal “continues to be grossly inadequate” and “nothing in the revised, reduced proposal addresses the concerns of the Norfolk Southern board,” the company said in a letter disclosed in a regulatory filing.
CP made its offer for Norfolk Southern public on Nov. 17, valuing the company at about $94.94 per share, but met with an unenthusiastic response.
CP first offered $46.72 in cash and 0.348 of its shares for every Norfolk share.
In the revised bid, CP slashed the cash component to $32.86 and offered 0.451 of a share in a new holding company that would own both Norfolk Southern and CP.
Norfolk Southern has also highlighted that the merger was unlikely to win approval from U.S. regulators.
CP’s shares were down marginally at C$168.77 on the Toronto Stock Exchange.
— Reporting for Reuters by Amrutha Gayathri in Bangalore.
