Norfolk Southern rejects Canadian Pacific's 'grossly inadequate' buyout bid

Norfolk Southern Corp. said it has rejected Canadian Pacific Railway Ltd.'s unsolicited buyout bid, saying it was "grossly inadequate" and creates substantial regulatory risks. The railroad company said on Nov. 17 that it received a buyout bid, in which Norfolk shareholders would received $46.72 in cash and 0.348 shares in a new company that would own the new combined company, for each Norfolk share they own. At the time, that worked out to about a 10% premium. Norfolk Chief Executive James Squires said he believes the company is on track to achieve compounded earnings-per-share in the double-digit percentage range through 2020. And given the company's history of returning capital to shareholders--$15 billion over the past 10 years--he believes the company can deliver compelling value to shareholders on its own. Squires said even if the proposed transaction was cleared by regulators, which he believes is unlikely, the companies would be subject to a "wide range of onerous conditions that would reduce the value of the stock consideration that is being proposed." Norfolk's, which was still inactive in premarket trade, has run up 22% over the past three months, but has slumped 15% year to date, while the S&P 500 has eased 0.5%.

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