Canadian Pacific Railway, which is seeking to merge with Norfolk Southern, stepped up pressure on its rival Wednesday by adding a payment that would vary depending on the stock price of the new company. The move comes just days after Norfolk Southern turned down a previous offer, worth roughly $27 billion based on current share prices, as “grossly inadequate.”
Canadian Pacific’s latest proposal includes a contingent-value right that could provide Norfolk Southern investors an extra payout of as much as $25 a share, or an additional value of up to $3.4 billion on top of the previous offer.
“CP [Canadian Pacific] is committed to this transaction, which would create a true coast-to-coast railway that enhances competition and generates significant shareholder value,” the Calgary, Alberta-based railroad, which has already been spurned twice by Norfolk Southern, said in a statement.
Following the announcement, Norfolk Southern said that its board of directors will “carefully consider” the revised proposal, noting that not much had changed from the previous offer it rejected on Dec. 7.
The two companies have been locked in a public battle since Canadian Pacific first launched its unsolicited bid to combine with its American counterpart on Nov. 17. Norfolk Southern has so far resisted the advances.
The prior proposal “did not address the substantial regulatory risks and uncertainties inherent in the proposed combination,” the Virginia-based railroad said, in a statement Wednesday.
Meanwhile, Canadian Pacific CEO Hunter Harrison said Wednesday that his company remains committed to the deal despite Norfolk Southern's opposition, and appealed directly to Norfolk’s shareholders -- suggesting that a proxy battle may be likely if the U.S. company’s board rejects the latest bid.
“If this is going to be a street fight, so be it,” Harrison reportedly said. “If they’re not going to come to the table and they’re not going to talk, and they’re not going to enter a dialogue with us, then the only way it’s going to happen is if you [Norfolk shareholders] show support for this transaction.”
Shares of Canadian Pacific closed up 2.9 percent in New York trading Wednesday, while Norfolk Southern's shares dropped 1.4 percent.