Canadian Pacific Railway Ltd. has again revised its bid for Norfolk Southern Corp.
The Calgary-based railway on Wednesday morning held a conference call and offered shareholders in Virginia-based Norfolk Southern up to $25 more per share via a contingent value right, a publicly traded security that is similar to an option. CP says the move adds about $3.4-billion to the purchase price, and investors can sell the security upon the regulator’s decision on the deal in October, 2017.
“Think about this as an insurance policy you can sell,” said Bill Ackman, a CP board member and head of the company’s largest investor, Pershing Square Capital.
Norfolk Southern has already rejected two previous offers from CP, including one made last week.
In addition to the CVR, CP has offered Norfolk Southern shareholders $32.86 (U.S.) in cash, and 0.451 of a CP share, which values the offer at $89 a share or $26.5-billion. Norfolk Southern shares traded at about $91 on Tuesday on the New York Stock Exchange.
Norfolk Southern says CP’s offer is undervalued and unlikely to be approved by the U.S. regulator, the Surface Transportation Board (STB).
Mr. Ackman said on the call Norfolk Southern has “misled” its shareholders on the deal’s value, which he says offers a 68-to-71-per-cent premium and the chance to have Hunter Harrison as chief executive officer.
“It’s pretty clear they don’t want to be acquired,” he said.
Norfolk Southern has pointed to a “white paper” written by two former STB commissioners, Francis Mulvey and Charles Nottingham, that said the regulator adheres to rules that are tougher than those of the past.
“In our expert opinions, the STB is not likely to approve CP’s proposed voting trust or the CP and NS merger,” the paper said.
CP said it disagreed with that position.
“Their white paper was published before CP delivered its detailed presentation describing the key features of the proposed merger and related voting trust including our proposal to put CP in trust. As such, their white paper is based largely on inaccurate assumptions, rumour, speculation, and conclusions that are unsupported by fact or by law,” CP said on Tuesday.
Mr. Harrison said on Wednesday 144 trust proposals have been approved by the U.S. regulators ahead of mergers in the past decades, and he is confident CP’s will be, as well.
“This lies in the hands of the NS shareholders,” Mr. Harrison said. “The clock is ticking down and it’s time to take some action here.”
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