Canadian Pacific Railway is moving away from a proxy fight for Norfolk Southern Corp. but still plans to pursue a takeover of the U.S. carrier, a person familiar with the plan said.
Canada’s second-largest railroad likely won’t present an alternative slate of directors at Norfolk Southern’s annual meeting, said the person, who asked not to be identified because the deliberations haven’t been made public. Instead, Canadian Pacific will probably request a nonbinding resolution on the ballot that would ask the Norfolk Southern board to start talks, the person said Feb. 9.
Canadian Pacific CEO Hunter Harrison is due to speak at an investor conference in Coral Gables, Florida, on Feb. 10 and may make an announcement regarding Norfolk Southern then, the person said. Representatives for Norfolk Southern and Canadian Pacific declined to comment on the plans, which were reported earlier by Dow Jones.
Acquiring Norfolk Southern would allow Harrison to create a coast-to-coast railroad that eliminates rail-car exchanges between the carriers and would enable him to apply his efficiency expertise to Norfolk Southern, which lags behind other large carriers in key service measures. Norfolk Southern’s board has rejected proposals from Canadian Pacific — including one in mid-December that was valued at about $27 billion.
Activist investor Bill Ackman, whose Pershing Square Capital Management is Canadian Pacific’s second-largest shareholder, said on a conference call on Dec. 16 that the easiest way forward would be to submit a shareholder resolution urging Norfolk Southern’s board to sit down with Canadian Pacific management to discuss a possible merger.
“I think shareholders would overwhelmingly approve that resolution,” Ackman said at the time. The investor and Canadian Pacific hadn’t ruled out a proxy fight at that point. Such a move, including nominating a slate of directors, was the “more aggressive way,” Ackman said.
The deadline to submit proxy materials or shareholder proposals for Norfolk’s annual general meeting is Feb. 14, according to its website.
The U.S. Surface Transportation Board has received dozens of comments on the potential deal from various stakeholders, including shipping customers, other railroads and lawmakers. Some shippers have expressed support for a merger, while a majority of the submissions have said further rail consolidation would hurt competition.