CP’s $28.4-billion bid a ‘substantial’ premium for Norfolk investors: CEO – by Eric Atkins (Globe and Mail – November 18, 2015)

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Canadian Pacific Railway Ltd. has released the letter it sent to Norfolk Southern Corp.’s chief executive officer outlining the proposed $28.4-billion (U.S.) takeover of the Virginia-based railroad.

In the letter dated Nov. 9, CP says the cash-and-stock offer of $46.72 a share and 0.348 in stock is a “substantial” premium to form a combined company that will be able to achieve more than $1.8-billion in cost savings “over the next several years.”

“In addition to providing NSC shareholders with a significant cash payment, the proposed transaction will provide NSC shareholders with an opportunity for meaningful upside appreciation in the future as synergies are realized as NSC shareholders will own 41 per cent of the new company,” reads the letter to Norfolk Southern CEO James Squires and signed by CP chief Hunter Harrison.

In a press release accompanying the release of the letter on Wednesday morning, CP said it was trying to counter the “misconceptions” that its offer is too low.

On Tuesday night, Norfolk Southern said the unsolicited offer was just a 10-per-cent premium over the day’s closing share price. It described the offer as low-premium, non-binding and highly conditional, and said its board would evaluate it.

Norfolk Southern also highlighted the regulatory hurdles any merger among the seven large North American railways would face.

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