March 8, 2016 11:40 AM, EST
CP Rail CEO Harrison Says Combination with CSX Still Possible
Norm Betts/Bloomberg News

Canadian Pacific Railway still is interested in exploring a merger with CSX Corp. even as Canada’s second-largest carrier continues to pursue Norfolk Southern Corp., Canadian Pacific CEO Hunter Harrison said.

CP and CSX “sat down and did what we call, ‘Let’s explore some opportunities,’ ” Harrison said in an interview March 8 on Canada’s BNN Television. CSX management didn’t say no, he said. “Nobody made any offers.”

CSX shares had jumped as much as 8% in after-hours trading March 1 after the Wall Street Journal reported CP approached CSX about a takeover in January and was rebuffed. On March 8, Harrison disputed the notion that the U.S. railroad shut the door on his company.

“I don’t know how we got rebuffed because we never made an offer,” he said.

Harrison has been pursuing an acquisition that would create a coast-to-coast railroad, eliminating railcar exchanges between carriers. He set his sights on Norfolk Southern, which lags other large carriers in key efficiency metrics, after exploratory talks on a possible linkup with CSX in 2014 failed to gain momentum for a deal. Norfolk Southern has rejected Canadian Pacific’s overtures.

“It’s hard to speculate on what is going to happen,” Harrison said March 8 regarding plans for CSX. He added that he has no preference between merging with CSX or Norfolk Southern.

“We believe we could fit end-to-end with anyone and create a stronger rail system,” he said.

Gary Sease, a spokesman for Jacksonville Florida-based CSX, didn’t immediately respond March 8 to requests for comment.

CP made three offers last year to buy NS, including one in December that valued the U.S. company at $27 billion. All were rejected as “grossly inadequate” and carrying regulatory risk.

The Calgary, Alberta-based railroad is putting forward a resolution to Norfolk Southern shareholders requesting that the U.S. company’s board engage in “good faith” discussions. Should that resolution be rejected, CP would end efforts to merge with Norfolk Southern and focus on its own network, Harrison said, reiterating earlier comments.