CP said exploring Norfolk Southern takeover

Reuters — Canadian Pacific Railway (CP) is looking to acquire U.S. peer Norfolk Southern, business news service Bloomberg reported Monday, citing people familiar with the matter.

Canada’s second-largest railroad operator has already raised financing and held early-stage merger talks with Norfolk Southern, Bloomberg reported, citing two of the people.

Freight carried by major U.S. railroads has fallen this year, compared with 2014, hurt by a drop in commodity prices.

CP CEO Hunter Harrison has long called for an industry consolidation. The company discussed a merger with CSX Corp. last year, but could not reach a deal.

Harrison came back from retirement to head Calgary-based CP after a proxy campaign by activist investor Bill Ackman’s Pershing Square Capital Management, which owns about nine per cent of the company.

Shares of Norfolk Southern rose 11.8 per cent to $89 in afternoon trading, while Canadian Pacific’s U.S.-listed shares were up 6.5 per cent at $143 (all figures US$).

Responding to “recent market activity” at the request of the Investment Industry Regulatory Organization of Canada (IIROC), CP said publicly Monday there is “no material news pending at this time” and it won’t comment on “market rumour and speculation.”

Norfolk Southern could not be immediately reached for comment.

The Virginia-based railway’s track network includes about 32,000 route km in the eastern and midwestern U.S., covering 22 states and the District of Columbia, running as far west as Des Moines and Kansas City.

The company had a market value of about $24 billion as of Friday close.

–– Reporting for Reuters by Manish Parashar in Bangalore. Includes files from AGCanada.com Network staff.