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Canada: Will antitrust problems endanger Canadian Pacific bid?

 |  November 25, 2015

The CEO of Canadian Pacific Railway has floated a creative way for holders of target Norfolk Southern to quickly cash in and avoid regulatory risk should they accept his $28.4 billion offer. But the plan is fraught with risk, and underscores the uphill battle Canadian Pacific faces as it attempts to consolidate the rail business.

CP chief Hunter Harrison in interviews over the past few days suggested that his company could create a voting trust or special holding company to house Norfolk Southern during what is expected to be a prolonged regulatory review of a deal, allowing the target’s shareholders to get a quick payout and transferring the regulatory risk to the acquirer.

Norfolk Southern, which is reviewing CP’s overture, has cited regulatory worries as a key factor in preventing railroad consolidation. Should the two sides agree to a deal the US Surface Transportation Board would have one month to accept a merger application and up to 16 months to render a decision, with considerable input expected from shippers and railroad rivals.

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