UPDATE 5-CP says willing to take Norfolk bid to shareholders

Tue Dec 8, 2015 7:54pm EST
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By Nick Carey, Allison Lampert and Svea Herbst-Bayliss

CHICAGO/MONTREAL/BOSTON Dec 8 (Reuters) - Executives of Canadian Pacific Railway touted the benefits of the firm's proposed bid for U.S. railroad Norfolk Southern Corp during a call Tuesday with analysts, but made it clear they would court activist investors and shareholders to fight a proxy battle to complete the deal.

In an unusual move, the executives were joined by shareholder Bill Ackman of Pershing Square Capital Management, who said that due diligence could be completed on Canadian Pacific's bid for the No. 4 U.S. railroad by the end of 2015.

Ackman, one of the world's most powerful activist investors who controls $14.8 billion in assets, at times dominated the two-and-a-half-hour call with analysts. He argued the combined stock of the two companies could be worth $237 by mid 2016 and the merged company could achieve 3 percent annual revenue from 2018 onward.

"The upside, if this transaction is approved, is enormous," said Ackman, also a CP board member.

Ackman said Canadian Pacific CEO Hunter Harrison and he have both been contacted by activists interested in a proxy fight with Norfolk Southern and both said if necessary they will take the proposed merger directly to shareholders.

One of the biggest questions facing any proposed merger between major U.S. railroads - and Canadian Pacific has significant U.S. rail holdings - is whether it would receive regulatory approval.

U.S. regulators have long been skeptical about rail mergers. Canadian National Railway's bid to buy Burlington Northern Santa Fe was blocked by authorities in 1999-2000.   Continued...