Canadian Pacific wants investigation of merger opposition

Norfolk Southern’s board of directors has already rejected proposals from Canadian Pacific twice – including one that valued the target at about $27 billion (U.S.) in mid-December.

The Canadian company said it sent a letter to inform the US government of the “unprecedented action of major competitors organizing to block a new entrant from enhancing competition”, according to a statement Tuesday. The STB is a regulatory body within the US Department of Transportation that governs railroad operations, including mergers and amalgamation proposals. “If Canadian Pacific’s bid for Norfolk Southern goes ahead, then CSX will be the next domino to fall”, said Scott Rostan, who worked on the Merrill Lynch team advising Norfolk Southern during its battle with CSX in the 1990s for control of Conrail, which was ultimately carved up between them.

“While the North American economy braces itself for more headwinds, we remain optimistic about the future and CP’s continued growth”, said Hunter Harrison, CP’s chief executive officer, in a statement accompanying the earnings release. “CSX to survive alone”. They are-with good reason-concerned that the proposed Norfolk Southern acquisition will lead to a more competitive industry: with the combined efficiencies, cost-savings, and the upgraded competitive advantages, the combined companies will be much better positioned to price competitively, improve service quality, and create the type of competitive environment that CP’s competitors are afraid of.

Canadian Pacific said it believes the strategy by the USA railway companies is likely illegal because it is anti-competitive and akin to a group boycott.

At the time, Norfolk Southern officials called the proposed deal “grossly inadequate”, Bloomberg reported. Executive leaders from other railroads have admitted to discussing the merger, and its potential impact together.