Norfolk board rejects Canadian Pacific's $28.4 billion offer
By Ankit Ajmera and Sneha Banerjee
(Reuters) - U.S. railroad operator Norfolk Southern Corp (NSC.N: Quote) said on Friday its board had rejected Canadian Pacific Railway Ltd's (CP.TO: Quote) $28.4 billion offer, calling it "grossly inadequate" and could face substantial regulatory hurdles.
A struggling coal transportation market, suppressed by weak market demand and global oversupply, has weighed on the earnings of Norfolk, making it more vulnerable as a takeover target. But on Friday the company put forward a passionate defense of why it should go it alone.
"The board believes that Canadian Pacific's proposed transaction is opportunistically timed to take advantage of Norfolk Southern's market valuation," Norfolk Chief Executive James Squires said on a conference call with analysts.
He added that the regulatory hurdles would remain the same "at any offer price".
Canadian Pacific said late on Friday it was disappointed with Norfolk's rejection of its proposal, and reiterated that it was committed to the deal and looked forward to engage with Norfolk's leadership and its shareholders.
The company did not say whether it would raise its offer, a move Canadian Pacific Chief Executive Hunter Harrison has previously said the company might need to do to win over Norfolk.
Canadian Pacific said it would hold a conference call on Dec. 8 to discuss "clarity, context and detail" of its offer and "correct every inaccuracy."
Norfolk's shares have fallen 16 percent this year, in tandem with other U.S. railroad stocks that have been hurt by a fall in high-margin coal shipments and weak oil prices. They closed down 1.1 percent at $92.06 on Friday. Canadian Pacific closed down 4.1 percent at C$180.15. Continued...