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Norfolk Southern Customers Lobby Regulators Against Canadian Pacific Bid

Steve Tatum/Flickr

Industry groups representing major freight customers of Norfolk Southern Corp. have asked the U.S. rail regulator to reject any bid for the railroad by Canadian Pacific Railway Ltd., according to letters viewed by Reuters.

The opposition from a broad array of customers to the hostile bid for the Norfolk, Virginia-based railroad could significantly harm Canadian Pacific's case if an expected lengthy proxy battle is resolved and a merger reaches the Surface Transportation Board for a review.

The Canadian company in mid-November disclosed its $28 billion offer to buy Norfolk Southern. It would be the first merger involving a U.S. railroad since STB rewrote the rules in 2001 after a wave of consolidation reduced the number of major North American railroads to seven from 35.

The proposed merger could face a tough review, and the regulator is expected to give customers even more time than in the past to air concerns at public hearings.

Norfolk Southern has rebuffed several bids from Canadian Pacific since November.

The letters have not been made public, but copies were viewed by Reuters. Sent in December, they express concerns over Canadian Pacific's plans to cut costs at Norfolk Southern would hurt service levels and that a merger would lead to a continental duopoly meaning higher prices for customers.

Norfolk Southern declined to comment on the letters.

A Canadian Pacific spokesman said the company "is aware of some shipper concerns" but looks forward to discussing the benefits of its bid with all stakeholders.

The documents also include letters from representatives of several state legislatures expressing opposition to the deal.

The letters include a joint one to Canadian Pacific, with STB carbon-copied, from the heads of the Alliance of Automobile Manufacturers and the Association of Global Automakers — which between them represent large automakers and suppliers including General Motors Co. and Toyota Motor Corp.

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By Nick Carey

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