January 6, 2016 / 9:01 PM / 3 years ago

House Democrats urge rejection of CP bid for Norfolk Southern

Coal trains approach Norfolk Southern's Williamson rail yard in Williamson, West Virginia at the border of Pike County, Kentucky May 13, 2015. REUTERS/Valerie Volcovici

WASHINGTON (Reuters) - Two senior Democrats in the U.S. House of Representatives urged federal regulators on Wednesday to reject any acquisition of railroad operator Norfolk Southern Corp by Canadian Pacific Railway Ltd.

In a Jan. 6 letter to the Surface Transportation Board, senior Democrats on the House Transportation Committee warned that an acquisition would reduce competition and exacerbate shipper concerns about costs.

“The board is in the process of responding to the letter,” said Dennis Watson, spokesman for the Surface Transportation Board, which can approve or disapprove acquisitions in the railroad industry.

The Canadian company in mid-November disclosed its $28 billion offer to buy Norfolk Southern. It would be the first merger involving a U.S. railroad since the Surface Transportation Board rewrote the rules in 2001 after a wave of consolidation reduced the number of major North American railroads to seven from 35.

“There are already strong indications that this merger will serve as a catalyst for even more consolidation in the railroad industry ... leaving shippers with fewer choices, less competition and prolonged service disruptions,” Representative Peter DeFazio of Oregon and Representative Michael Capuano of Massachusetts wrote.

“The only benefit to this ill-conceived transaction is to CP - to pad the pockets of Wall Street investors and corporate executives at the expense of captive shippers and the public interest,” they said.

DeFazio is the ranking Democrat on the transportation committee, while Capuano is the top party member on the panel’s Subcommittee on Railroads, Pipelines and Hazardous Materials.

Industry groups representing major freight customers of Norfolk Southern have also asked the Surface Transportation Board to reject any bid by Canadian Pacific.

Norfolk Southern has rebuffed several bids from Canadian Pacific since November.

Reporting by David Morgan; Editing by James Dalgleish and Matthew Lewis

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