Canadian Pacific Looking For Early Approval of Merger Structure
Canadian Pacific says it will ask federal regulators for preliminary approval of the structure of its proposed takeover of Norfolk Southern railroad.
The rarely used deal structure, known as a voting trust, would allow Canadian Pacific and Norfolk Southern to remain independent until their merger gets regulatory approval, but allows the U.S. railroad’s shareholders to get paid before the deal closes.
The U.S. Surface Transportation Board (STB) would need to approve the voting trust before beginning the deal review process.
Norfolk Southern, which has repeatedly rebuffed Canadian Pacific, has said it does not believe the voting trust will be approved.
“We are skeptical that the STB will give a definitive ruling, especially when NS will not even sit down with us, but we are willing to go the extra mile if that is what it takes to get NS to the table,” Canadian Pacific Chief Executive Hunter Harrison said in a statement.
Part of the reason why Norfolk Southern has rejected all of Canadian Pacific’s offers so far is because it questions whether the U.S. Surface Transportation Board would approve such a deal. No major rail mergers have been approved since regulators imposed tough rules on them in 2001.
But Norfolk Southern has also said it believes Canadian Pacific’s offers remained “grossly inadequate” even as they approached $30 billion.
Democrats from Pennsylvania’s congressional delegation sent a letter to the STB earlier this month, raising concerns about impact of the proposed merger and the voting trust structure.
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