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Canadian Pacific Norfolk Southern Merger

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Posted by Ulrich on Tuesday, February 2, 2016 1:12 PM

Well, I'm Canadian.. I've lived here for 50 years and speak both official languages fluently. Canuck is NOT a bad word.  

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Posted by Victrola1 on Wednesday, February 3, 2016 5:27 PM

 

Effective regulatory approval fact-based and free of political interference, CP argues in white paper 

http://www.cpr.ca/en/investors/effective-regulatory-approval-fact-based-and-free-of-political-interference

The War of White Papers latest salvo from the north. 

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Posted by Paul_D_North_Jr on Wednesday, February 3, 2016 8:52 PM

Wonder how many political "movers-and-shakers" ride home on CP  tracks, as compared (opposed ?) to those who use NS ? 

(Yes, including Chicago as well as Washington, D.C.)

- Paul North. 

"This Fascinating Railroad Business" (title of 1943 book by Robert Selph Henry of the AAR)
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Posted by Ulrich on Thursday, February 4, 2016 7:18 AM

Probably not too many movers and shakers ride public transportation to work.

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Posted by CSSHEGEWISCH on Thursday, February 4, 2016 7:27 AM

I'd like to know what parallel universe that CP's management and Ackmann came from.  A regulatory process without any political factors does not exist.

The daily commute is part of everyday life but I get two rides a day out of it. Paul
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Posted by Ulrich on Thursday, February 4, 2016 8:07 AM

If we only acted when the odds are clearly in our favor nothing of importance would ever get done. The odds are stacked against them, but I wouldn't count them out just yet.  

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Posted by Ditchlight on Thursday, February 4, 2016 8:56 AM

but we all now live in a universe that have activist investors, you only have to look at ConAgra, Dupont, Cabela's and now NS. As I believe this merger had more to do with Pershing Square Capital Management than it does CP.

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Posted by Ulrich on Thursday, February 4, 2016 10:43 AM

Activist investors aren't necessarily a bad thing. CP is a much better company today thanks to Ackman, HH,  and Keith Creel. I know that some here might disagree with that, but the numbers are the numbers.  I'm not really sold on the merger.. doesn't make a whole lot of sense to me, but then again, I'm not close to the action. I trust they see things that I'm not seeing. Given their track record I'll give them the benefit of the doubt.

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Posted by Victrola1 on Wednesday, February 10, 2016 11:45 AM
  • February 10, 2016 – BB&T Capital Markets 31st Annual Transportation Services Conference at 3:45 p.m. eastern standard time in Coral Gables, Florida.

There will be live audio webcasts of Mr. Harrison's remarks. Replays of the webcast will be available in the Investor section of CP's website: www.cpr.ca  

http://www.cpr.ca/en/investors/cp-chief-executive-officer-to-address-investor-conference-february-10

News from the front via radio. 

What would Edward R. Murrow say? 

http://www.npr.org/templates/story/story.php?storyId=5422698

 

 

 

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Posted by ERail on Wednesday, February 10, 2016 4:43 PM

Ulrich

Activist investors aren't necessarily a bad thing. CP is a much better company today thanks to Ackman, HH,  and Keith Creel. I know that some here might disagree with that, but the numbers are the numbers. 

Yeah, every situation is different.  Sometimes activists do more harm than good but other times there is a net benefit.

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Posted by jeffhergert on Wednesday, February 10, 2016 11:16 PM

Ulrich

Activist investors aren't necessarily a bad thing. CP is a much better company today thanks to Ackman, HH,  and Keith Creel. I know that some here might disagree with that, but the numbers are the numbers.  I'm not really sold on the merger.. doesn't make a whole lot of sense to me, but then again, I'm not close to the action. I trust they see things that I'm not seeing. Given their track record I'll give them the benefit of the doubt.

 

Tyco, Enron, AIG, etc. all had good numbers, too.  Before they collapsed.

Jeff 

 

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Posted by Ulrich on Thursday, February 11, 2016 10:07 AM

They didn't have good numbers to those who cared to look close enough and had some understanding of these businesses. I'm no forensic accountant but I was able to see the writing on the wall about Nortel and bailed out long before their accounting troubles became public. If one takes the time to study the reports then unexplained inconsistencies usually reveal themselves even to the nonaccountant. This is why I don't own stock in more than three companies... I'd never have the time to study all those reports.  

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Posted by kgbw49 on Thursday, February 11, 2016 5:30 PM

Here is one CP Consolidation that we can probably all agree on that we like...well, except maybe for Mr. Harrison...

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Posted by CSSHEGEWISCH on Friday, February 12, 2016 7:01 AM

The C in C-Liner stands for Consolidation, so this would also fit:

http://www.rrpicturearchives.net/showPicture.aspx?id=1599807

The daily commute is part of everyday life but I get two rides a day out of it. Paul
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Posted by Victrola1 on Monday, February 15, 2016 7:14 AM

The War of the White Papers now has a web site. 

http://cpconsolidation.com/

 

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Posted by Electroliner 1935 on Monday, February 15, 2016 1:45 PM

Orwell lives. Doublespeak is alive and well. 

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Posted by Miningman on Monday, February 15, 2016 3:12 PM

Well in light of Einsteins space/time continuum being recently verified and 'proven" how about someone appearing, in say 1955, and announcing to various shareholders and executives that the Canadian Pacific Railway is seeking to purchase the Pennsylannia RR, the N&W, the Erie RR, the Lackawanna RR, the Southern and all its affiliates, the Wabash, the Nickel Plate, the D&H and numerous other smaller but important carriers all in one fell swoop, then I think you would have been put in a straight jacket and taken to the looney bin. In essence this is what is happening and, to me at least, seems pretty absurd...and I'm a Canadian and the CPR is my favourite by a mile, but c'mon, what a crazy thing is this!

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Posted by Wizlish on Monday, February 15, 2016 3:17 PM

Not all that much wackier than what the van Sweringens bankrolled by Morgan did -- or on only a nominally smaller scale, Robert R. Young.

(Granted, the PRR would always have been too arrogant to sell or be proxy-acquired... but we all know how quickly that played out.)

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Posted by Paul_D_North_Jr on Monday, February 15, 2016 8:06 PM

Miningman
[snipped - PDN] . . .  how about someone appearing, in say 1955, and announcing to various shareholders and executives that the Canadian Pacific Railway is seeking to purchase the Pennsylannia RR, the N&W, the Erie RR, the Lackawanna RR, the Southern and all its affiliates, the Wabash, the Nickel Plate, the D&H and numerous other smaller but important carriers all in one fell swoop, then I think you would have been put in a straight jacket and taken to the looney bin. . . . [snipped - PDN]

I think it was the epilogue of Gen. Sir John Hackett's 1980's book "The Third World War: August 1985" which had a similar scenario about a guy who - in the early years of the 20th century - predicted the history and shocking reversals of fortune of the European countries up to the mid-century.  As I recall, it ended: "They locked him up as a madman, of course."

- Paul North. 

P.S. Yes !!! I FINALLY found it - from: http://kelvin12.livejournal.com/46098.html 

"There is a nice story of a political prophet in Munich in 1928, who was asked to prophesy what would happen to the burghers of his city in five, fifteen, twenty, and forty years' time.

He began: 'I prophesy that in five years' time, in 1933, Munich will be part of a Germany that has just suffered 5 million unemployed and that is ruled by a dictator with a certifiable mental illness who will proceed to murder 6 million Jews.'

His audience said: 'Ah, then you must think that in fifteen years' time we will be in a sad plight.'

'No,' replied the prophet, 'I prophesy to you that in 1943 Munich will be part of a Greater Germany whose flag will fly from the Volga to Bordeaux, from northern Norway to the Sahara.'


'Ah, then you must think that in twenty years' time, we will be mighty indeed.'


'No, my guess is that in 1948 Munich will be part of a Germany that stretches only from the Elbe to the Rhine, and whose ruined cities will recently have seen production down to only 10% of the 1928 level.'


'So you think we face black ruin in forty years' time?'


'No, by 1968 I prophesy that real income per head in Munich will be four times greater than now, and that in the year after that 90% of German adults will sit looking at a box in a corner of their drawing rooms, which will show live pictures of a man walking on the moon.'


They locked him up as a madman, of course."


- General Sir John Hackett, "The Third World War"

"This Fascinating Railroad Business" (title of 1943 book by Robert Selph Henry of the AAR)
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Posted by Miningman on Tuesday, February 16, 2016 9:46 PM

Great post Paul North! As Mark Twain stated "Truth is stranger than fiction". We shall see how this really all plays out. If we wrote something "way out there" it is likely .2% accurate at best and not even close to what will happen. 

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Posted by schlimm on Wednesday, February 17, 2016 6:58 AM

Predicting the future is pretty easy 50+ years after it has already occurred.

C&NW, CA&E, MILW, CGW and IC fan

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Posted by Victrola1 on Wednesday, February 17, 2016 9:52 AM

Canadian Pacific (TSX:CP) (NYSE:CP) today announced it will seek a declaratory order from the U.S. Surface Transportation Board (STB) confirming the viability of the voting trust structure that CP has suggested as part of its proposed merger with Norfolk Southern Corp. (NS). CP urges NS, consistent with its duties to its shareholders, to assist constructively in this effort, but intends to proceed regardless of NS's cooperation.   

http://www.cpr.ca/en/canadian-pacific-to-seek-declaratory-order-from-u-s-surface-transportation-board

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Posted by Miningman on Thursday, February 18, 2016 9:40 PM

So while we wait as these 2 giants duke it out It gives us a chance to wonder if 2 systems North America wide is inevitable as the end game. I don't know..Americans have long been railroading in Canada and Canadians in America, but surely the border means something. Policies and politics shift over time. 

After 911 many things changed for the railroads at the borders. Point is I believe the border trumps a large multinational physically connected railroad system. 

Until we invent "beaming" a-la Star Trek to move freight I think it ends with 2 in the West, 2 in the East, 2 in Canada running down the center of America in a North/South spine. Chicago congestion will be solved with multiple gateways. We almost sort of have that now, except for the Chicago problem. 

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Posted by Wizlish on Friday, February 19, 2016 4:26 AM

Miningman
After 911 many things changed for the railroads at the borders. Point is I believe the border trumps a large multinational physically connected railroad system.

Whew!  I was worried for a moment there that a Canadian system might acquire one or more significant carriers in the United States, say a strategic north-south system serving modern container ports, for competitive advantages.  Wait ... what? 

I can't blame Canadians for thinking that the same mojo that Tellier and EHH could summon up can't be repeated for Ackman & Co. and EHH.  They can even trot out the financial advantage of over-the-border management as the pace of inversions under Obama (and prospectively under the tax policy of a Clinton or Sanders administration!) continues to accelerate.

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Posted by kgbw49 on Friday, February 19, 2016 5:52 PM

Because of the condition to "enhance competition" under the new merger rules, plus nationalistic pride (not an insult) in both Canada and the US, the "end game" will result in two in Canada, two in the western US, and all four having a piece of the pie in the eastern US. CP and CN will all have routes to the Gulf (CN already has one), to Atlanta and Charlotte, and into Ohio, Pennsylvania and NJ/NY from Chicago and Buffalo, most likely primarily on secondary CSX and NS routes, while BNSF and UP will end up with ownership of the main east-west routes and the main "operational triangle routes" (Chicago-Jacksonville-NY/NJ-Chicago) of CSX and NS integrated into their route structures. Just one opinion formed from looking at a very cloudy and cracked crystal ball.

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Posted by Miningman on Friday, February 19, 2016 7:52 PM

Ya, I suppose you are correct. I was thinking more along the lines of blocking the Michigan Central Bridge in Fort Erie with those giant steel walls across the tracks or discontinuing passenger service VIA/Amtrak Toronto-Chicago thru the St. Clair Tunnel. CN taking over IC certainly trumps those events, as you well pointed out.

How about the Union Pacific buying up majority interest in Canadian Pacific? This actually is a nice fit, in some areas at least. That would open the door for BNSF to acquire CN or merge the two. KCS has to go somewhere. Then you have 2 in the East and 2 in the West setting up either the grand finale or leave it at that. 

My take- nothing happens and all stays the same for a good long while yet.

 

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Posted by Paul_D_North_Jr on Saturday, February 20, 2016 8:46 AM

A week or so ago I received a 'mailer' or 'flyer' (best words for it) from NS to shareholders like me.  Touted how much they'd done  to improve things, what their plans were for the future, etc. to deal with the obvious issues (loss of coal traffic, etc.). 

Not very impressive - lack of hard numbers and specifics.  One step above a magazine ad - about 3 steps below an annual report.  Most PowerPoints at industry presentations are far better.  It would have been better to not send it at all - makes me wonder about the quality of the management and its strategic thinking, if that's the best they can do.  Then again, maybe it was just to reach out to, contact, and reassure small, non-institutional investors, who don't have the inside or frequent info that the big ones do. 

- Paul North.       

"This Fascinating Railroad Business" (title of 1943 book by Robert Selph Henry of the AAR)
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Posted by Dakguy201 on Saturday, February 20, 2016 10:04 AM

I received the same mailer as Mr. North, except mine was online.  Lots of white space, some photos, some vague promises of improvement but not the kind of detail that would make one think there was a thought out plan somewhere behind it.

Perhaps Mr Harrison's greatest gift is that his appearance causes near paralysis in the management of his targets.

 

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Posted by Wizlish on Saturday, February 20, 2016 10:28 AM

Miningman
How about the Union Pacific buying up majority interest in Canadian Pacific? This actually is a nice fit, in some areas at least. That would open the door for BNSF to acquire CN or merge the two. KCS has to go somewhere.

KCS has the Mexican connection, which neither of the others imho is set up to optimize either operationally or strategically.  I would expect them (together with Ferromex, etc.) remaining reasonably independent as the cost of acquisition might kill any prospective bottom-line profitability even if EHH were to implement some of his OR-increasing techniques.

I have the impression -- I might be wrong -- that Ackman is using EHH more as a figurehead than an actual strategic force for ongoing optimization of a combined CP-NS.  Based on the past few decades of financier 'involvement' in railroading, I have to wonder whether the present CP has much of a clue about running NS more effectively once Hunter becomes an 'emeritus' eminence grise.  (And his 'boogeyman' factor decreases...)

My understanding is that Canadian law prohibits a foreign (of course including any United States) company acquiring, and probably exercising ownership control of, a Canadian railroad company.  That's why a Canadian entity can own things like Grand Trunk or Illinois Central, or pretend to merge ATSF and SP while stripping out the key assets, but Buffett or anyone else in the United States can't reciprocate.  

Don't know what protections might be in place for hedge-fund ownership of capital allowing 'back-door' influence on a Canadian corporate board and thereby exerting de facto control, but as far as actual merger would go it's probably a one-way street.

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Posted by Miningman on Saturday, February 20, 2016 11:50 AM

The NYC had 73% ownership of the TH&B, granted this was through subsidiary's Michigan Central and the Canada Southern. Their direct ownership was around 37%. The Pere Marquette had its own tracks from the border all the way into St. Thomas. Most American roads operated in Canada under chartered subsidiary's and if not then trackage rights. NS operates today on trackage rights across Southern Ontario Detroit-Buffalo on CN thanks to the former Wabash. 

However, I believe you are correct on an outright purchase of CP, limiting ownership to minority status and no more than 49%. 

A Union Pacific/Canadian Pacific/Kansas City Southern system under one banner would be a formidable railroad. In addition to UP's historic overland routes this would add the growing future importance of North-South and encompass 3 countries. It would be a radical departure for UP yet seems to fit their style of service and nation building. 

 

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