■ Business Trends: TRANSPORTATION


No deal? T


by Jack Cooksey


hree times was not the charm for a Canadian company that attempted to woo Norfolk Southern Corp. into


a merger late last year. But the chase, by Canadian Pacific Rail-


way Ltd., is still on. According to industry insiders, the endgame could come in May at Norfolk Southern’s annual meeting, or even earlier, with one source speculating that the Norfolk-based transportation company could see a takeover attempt from its shareholder ranks engineered by Canadian Pacific’s largest stakeholder, billionaire investor Bill Ackman and his Pershing Square Capital Manage- ment group. In the meantime, Norfolk Southern is


reaching out to investors with a new operat- ing plan and a message that the regulatory hurdles to such a merger are high. In January, weeks after Norfolk South-


ern’s board rejected a third unsolicited bid on Dec. 23 of $27 billion, the likelihood of a merger between the companies appeared increasingly dim. Jim McClellan, a 40-plus-year veteran of


the railroad industry, assessed the situation this way: “I do not think there’s a snowball’s chance in hell that the merger will go through.” McClellan, a former senior vice presi-


dent with Norfolk Southern and now a vice president of Woodside Consulting in Virginia Beach, added, however, that he could see Ackman trying to sway Norfolk Southern’s shareholders to replace board members and ultimately replace CEO James Squires with Canadian Pacific’s CEO, E. Hunter Harrison Jr. Another rail and shipping expert, retired


consultant Jim Hanscom, says Norfolk Southern’s shareholders may be enticed by the case that the Canadian company could tighten the U. S. railroad’s operations and


AP Photo/The Roanoke Times, Erica Yoon


cost structure. He believes the company could appear vulnerable in the play for a takeover. “It does seem like they’ve been slow at


the switch for a long time,” Hanscom says of Norfolk Southern, “and their metrics for how they have run the railroad have not held up for a while.” Canadian Pacific could put forth a finan-


cial plan that shows a big payoff to investors, Hanscom says. “If you’re a shareholder, there is an appeal there.” With a contraction in the coal industry


squeezing freight carriers, Norfolk Southern has put a keener focus on reducing costs and honing its operations. McClellan and Hanscom both predict


that a new Harrison regime could come with a deep impact on Norfolk Southern through severe cost cutting. McClellan describes Harrison as “very aggressive and very smart, but not a long-term thinker. He would hurt Norfolk Southern and strip the capabilities.” Meanwhile, representatives for both rail-


road companies aren’t talking. They declined to comment for this story beyond press state- ments released on Dec. 23. Canadian Pacific did release a white paper


in January restating its case for merging with Norfolk Southern. Many letters of opposition have been sent to the U. S. Surface Transporta- tion Board, the federal agency with oversight over railroad mergers. Everyone from railroad shippers to manufacturing associations, the West Virginia Coal Association and elected officials have weighed in. They say the deal poses too much regulatory risk and would reduce competition. In Virginia, Gov. Terry McAuliffe and


the state’s congressional delegation, including


Sens. Tim Kaine and Mark Warner and 10 of Virginia’s 11 members of the House, are against the proposal.


www.VirginiaBusiness.com VIRGINIA BUSINESS 65


Norfolk Southern CEO James Squires described Canadian Pacifi c’s offer as “grossly inadequate.”


Norfolk Southern continues to reject merger offers, but could a proxy fight be on the way?


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61  |  Page 62  |  Page 63  |  Page 64  |  Page 65  |  Page 66  |  Page 67  |  Page 68  |  Page 69  |  Page 70  |  Page 71  |  Page 72  |  Page 73  |  Page 74  |  Page 75  |  Page 76  |  Page 77  |  Page 78  |  Page 79  |  Page 80