Norfolk Southern on Friday rejected an unsolicited “business combination” proposal from Canadian Pacific.
The proposal would have created a transcontinental railroad, and CP said their offer included a premium in cash and stock for NS shareholders. The Canadian company also contended a merger would have led to the potential for faster earnings growth than either CP or NS could achieve on their own, “unparalleled customer service” and competitive rates.
“We believe in our ability to generate greater shareholder value through execution of our strategy – delivering efficient and superior service to build a more profitable franchise based on price and volume growth, implementing efficiency measures, and increasing returns on capital to strengthen our financial performance, all while maintaining our disciplined capital return strategy,” Norfolk Souther Chairman, President and CEO James A. Squires said in a statement.
“Norfolk Southern has made growth investments and we expect to realize the benefits of these investments in the years ahead, especially as our intermodal volumes continue to build,” Squires added. “Specifically, we expect to achieve an operating ratio below 70 in 2016 with additional improvements over the next five years resulting in increasing ROE and an operating ratio below 65 by 2020. By maximizing our asset utilization, we believe we can achieve double-digit compounded EPS growth over this period. In short, Norfolk Southern is well positioned to deliver compelling value to our shareholders.”
CP expressed disappointment with NS’ decision and said the company misrepresented some aspects of its proposal.