Hunter Harrison, Canadian Pacific Railway Ltd.'s chief executive officer, has signalled he will abandon his four-month push to form North America's biggest railway if Norfolk Southern shareholders reject his latest move.
CP said on Tuesday it will submit a shareholders' resolution at Norfolk Southern's next annual meeting that asks board members to negotiate with CP on a $28-billion takeover. Norfolk has rejected three offers from CP since November, calling the deal undervalued and unlikely to win regulatory approval.
"Yeah, I think so," he said, when asked if he would walk away if the resolution did not pass, "unless there are circumstances that I am not aware of."
He has said CP could instead spend its cash buying back some of its own shares, which have fallen in price by 26 per cent in the past year.
"We're making preparations that if we are not successful in opening a dialogue, then we're going to go back and focus on running a hell of a railroad … and reward shareholders," he said at an investors' conference in Florida on Wednesday.
Norfolk Southern said this week that more talks with CP would be pointless unless the company raises the offer and addresses regulatory concerns.
The U.S. Surface Transportation Board, which has the authority to approve railway mergers, has received several letters opposing the merger plan from Norfolk Southern customers and U.S. politicians. Most of the industry letters say they fear a merger would reduce competition and lead to worse service.
"NS, like other major railroads, is struggling to deal with the [shifting] economic situation," R. Powell Felix, president of Indiana Boxcar Corp., which operates four short-line railways that connect to Norfolk Southern, wrote in a letter to the STB. "If CP claims to have some magic solution to the industry's challenges, they have done a remarkable job of keeping it hidden well."
Mr. Harrison said he was confident that the regulator would be able to review any merger independently, no matter how much industry and political opposition it faced.
"They are people of outstanding integrity and should be able to deal with this," he said of the regulator's board members.