February 1, 2016 / 10:05 PM / 2 years ago

Pennsylvania Democrats raise concerns over CP's Norfolk Southern bid

CHICAGO (Reuters) - Democrats from Pennsylvania’s congressional delegation sent a letter to a federal rail regulator on Monday raising concerns over the possible negative impacts of a merger between Canadian Pacific and Norfolk Southern Corp.

The Canadian Pacific railyard is pictured in Port Coquitlam, British Columbia February 15, 2015. REUTERS/Ben Nelms

The letter sent to the Surface Transportation Board raised concerns over the impact it could have on railroad jobs in Pennsylvania and said the merger could lead to “disinvestment” in rail infrastructure in the state.

Senator Bob Casey and five members of the U.S. House of Representatives, all Democrats, also wrote that they were deeply concerned about the voting trust structure Canadian Pacific has proposed in its bid for the No. 4 U.S. railroad.

The Canadian company in mid-November disclosed its $28 billion offer to buy the Norfolk, Virginia-based railroad.

Norfolk Southern has rejected Canadian Pacific’s advances, setting the stage for a possible proxy battle.

The Surface Transportation Board would have to review a merger of the two railroads, which would be a test case since the regulator rewrote the rules for approving takeovers in 2001. The review process would include public hearings where rail customers, labor groups and elected officials would be allowed to weigh in.

In their letter, the Pennsylvania Democrats wrote that they believe the acquisition could hurt thousands of rail shippers, manufacturers and local communities, as well as rail workers, in the state, and urged a thorough review of any proposed merger.

Canadian Pacific has said that a takeover of Norfolk Southern would lead to $1.8 billion in annual savings.

In early January, two senior Democrats in the U.S. House of Representatives urged the board to reject any merger of Canadian Pacific and Norfolk Southern.

A number of industry groups and rail customers, plus a couple of the unions representing workers at Norfolk Southern have also come out against any merger.

Last week, the board posted letters from some rail customers who argue that, on the contrary, a merger of Canadian Pacific and Norfolk Southern would create a transcontinental railroad that would result in better service.

Reporting By Nick Carey; Editing by Jonathan Oatis

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