CP Seems to be About the Only Party in Favor of its Proposed Stock Takeover of Norfolk Southern

The U.S. Surface Transportation board on Friday made available for public view the correspondence it has received regarding a proposed merger of Canadian Pacific and Norfolk Southern and no one seems to want it except CP.

At this point, the issue is moot for the STB because a formal merger plan has not been filed with the board. NS management has rejected as “grossly inadequate” CP’s proposal to buy NS stock and has also cited potential regulatory opposition.

In the correspondence that the STB received within the past month, no shipper group or public official expressed support for the merger.

Some of the concerns raised by NS were echoed in the correspondence. Some argued that CP’s plan to create a voting trust while the merger works its way through the regulatory review process is illegal.

There also was expressed a concern that CP’s emphasis on increasing profits might result in worker layoffs.

A CP spokesperson took issue with that, saying that CP work force reductions have come through attrition and not furloughs

“This is more evidence that NS leadership continues to mislead all stakeholders, including shippers, trade unions, and lawmakers, before they have even sat down with us to discuss the details of this transformational opportunity,” CP spokesman Martin Cej said.

“The record shows that any claim that CP boosts profits at the expense of its workforce is false,” Cej said. “CP has worked hard with union leadership to negotiate forward-looking, fair agreements in Canada and the U.S.

“And contrary to accusations that CP is a company that ‘cuts to the bone,’ CP spent approximately $1.5 billion, or 21 percent of revenue, on capital expenditures — by percentage of revenue, this represents more money invested in capex than any other Class I railroad.”

Among the other groups to file letters of concern or opposition with the STB were Subaru, the Pennsylvania Manufacturers Association, the Indiana Manufacturers Association, the Palmetto AgriBusiness Council and the congressional delegations of Virginia and Illinois.

The Alliance of Automobile Manufacturers and the Association of Global Automakers — which represent all of the major automakers in the U.S. — said the merger “poses significant service and competitive concerns.”

The automaker trade groups said that additional consolidation in the railroad industry would result in increased rates and reduced service options while threatening competition.

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