Antitrust Law Daily Canadian Pacific Railway ends efforts to merge with Norfolk Southern
Monday, April 11, 2016

Canadian Pacific Railway ends efforts to merge with Norfolk Southern

By Linda O’Brien, J.D., LL.M.

Canadian Pacific Railway Ltd. (CP) has terminated efforts to merge with Norfolk Southern Corporation (NS), including the withdrawal of a resolution asking NS shareholders to vote in favor of good-faith negotiations between the two companies, the railway announced today. The announcement followed the Department of Justice Antitrust Division’s opposition to CP’s petition for a declaratory order regarding use of a voting trust during the pendency of a review of the merger by the Surface Transportation Board.

In pursuing the merger with NS, CP proposed the creation of an end-to-end railroad that would enhance competition, ease freight congestion, improve service to shippers, better support the economy, and generate significant shareholder value for both companies, CP said.

The decision to end its merger efforts came after the Department of Justice filed a reply on April 8, opposing CP’s petition for a declaratory order regarding the use of a voting trust, pending the Surface Transportation Board’s review of the proposed merger between CP and NS. The reply stated that the proposed voting trust would fail to preserve the independence of the merging railroads during the pendency of the transaction’s regulatory review and would risk harm to current and future competition. It urged the Board to reject the proposed voting trust structure or, in the alternative, to deny the request for a declaratory order.

"We have long recognized that consolidation is necessary for the North American rail industry to meet the demands of a growing economy, but with no clear path to a friendly merger at this time, we will turn all of our focus and energy to serving our customers and creating long term value for CP shareholders," said CP CEO E. Hunter Harrison.

Canadian Pacific Railway was founded in 1881 to link Canada's populated centers with the potential of its relatively unpopulated west coast. Today, the railway’s 14,000-mile network extends from Vancouver to Montreal, and to the U.S. industrial centers of Chicago, Newark, Philadelphia, Washington, New York City, and Buffalo.

Norfolk Southern Corporation operates over 22,000 route miles in 22 eastern states and the District of Columbia and has rights in Canada from Buffalo to Toronto and over the Albany-to-Montreal route. NS is a major transporter of domestic and export coal.

Companies: Canadian Pacific Railway Ltd.; Norfolk Southern Corporation

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