Duplicate post deleted.
Department of Defense joins DOJ in thumbs down
http://www.railwayage.com/index.php/regulatory/doj-dod-oppose-cp-ns-combination.html?channel=40
Never too old to have a happy childhood!
It may not be over 'til it's over, but it is sure starting to look like it's over.
In some respects, when one looks at the CP network, it is understandable why they want to try to expand. Canada's population is about the size of California's population, so the transportation market there that goes with that population is a certain size. And even in Canada, CP does not go everywhere like CN does.
Then in the US, CP's route structure is geographically limited, with much of it in granger territory. So to grow the franchise CP obviously needs to go to more places where there are more people and industry, and that means some form of US expansion.
Maybe a Plan B for CP is to try to stitch together some regionals and some short lines from Genesee & Wyoming. For instance, acquisition of the CF&E, the former DT&I, the Wheeling & Lake Erie, and the B&P would give CP access to every major city north of the Ohio River and west of the Appalachians. Bring the mains up to 40 mph Class 3 track, connect those markets to the Port of Vancouver and the Port of Montreal, and add that traffic to existing traffic on existing lines and they might have a ballgame in terms of a US expansion that might get approved.
There is also an Alabama cluster that if it could somehow be reached via trackage rights from Cincinnati and appended to those other routes would get CP to the Port of Mobile.
But all that might likely take a bit longer than current CP management would prefer, but it would not be that different than what CN did stitching together the DM&IR, Wisconsin Central, and EJ&E to connect the former IC lines to the Ports of Vancouver and Prince Rupert.
Of course there is always KCS to get to Texas and the Gulf Coast as a Plan C, and that would be under the old "merger-friendly" merger rules. That gets CP to Dallas, Houston, New Orleans and Mobile, not to mention Mexico.
Continued interesting times indeed.
Yes to above. Advantage 90 percent CP and Canada, injury to rest of U.S. roads, especially BNSF and UP, and to our West Coast ports.
If Harrison and Ackman can't see the advantages of KCS and the new territory, plus Mexico, outlined above, it looks like they will have to be satisfied cultivating their own backyard.
BaltACD Department of Defense joins DOJ in thumbs down http://www.railwayage.com/index.php/regulatory/doj-dod-oppose-cp-ns-combination.html?channel=40
http://www.stb.dot.gov/filings/all.nsf/ba7f93537688b8e5852573210004b318/2e69852c5664f0cb85257f8e0054ea7b/$FILE/240423.pdf
Technically neither department objects to the merger, rather to the trust arrangement where EHH could run NS as a virtual ‘fait accompli’ CP subsidiary before the merger is approved or not.
I think the strategy that opposers including NS and other railroads are using is to try to stop the merger by having the phony "reverse trust" manuever declared what it is - a de facto end run around the merger rules.
if the phony trust manuever is not allowed, then CP can either drop the bid or try the hostile takeover route. In the latter case, other bidders will materialize because they are not going to let traffic originated on NS that is destined for the Pacific Northwest now go via Kingsgate, or international container traffic originated on NS that would otherwise be shipped via US West Coast ports be diverted to Vancouver and an expanding Roberts Bank.
in that scenario, the lion's share of NS will go to the lion, and the scraps will go to the hyena, CP.
wanswheel Technically neither department objects to the merger, rather to the trust arrangement where EHH could run NS as a virtual ‘fait accompli’ CP subsidiary before the merger is approved or not.
But, as I read the tea leaves, the voting trust arrangement CP wants is critical to its business case for the merger. If it can't do the voting trust, the merger makes no sense. In fact, if the voting trust is turned down, there's probably little (if any) prospect of the NS stockholders passing the resolution directing the NS board to negotiate with CP. That's why, in my view, an adverse STB decision on the voting trust will, as a practical matter, kill the merger. And DOJ's opposition (more so than DOD's) makes it very likely that this is what will happen.
The other thing that could happen is that STB will refuse to issue a definitive declaratory order one way or another, on the grounds that the issue isn't "ripe" (i.e., there is no actual voting trust or merger on the table). This is an alternative briefly suggested by DOJ (Fn 5) and several other commentors. If STB did this, I would expect that the decision would also have some negative comments about the voting trust which would have the same practical effect as an adverse decision on the merits.
Stating the obvious department:
https://finance.yahoo.com/news/canadian-pacific-terminates-efforts-buy-113911974.html
This was starting to sound more and more like the Monty Python "Pet Shop" sketch.
-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/)
oltmannd Stating the obvious department: https://finance.yahoo.com/news/canadian-pacific-terminates-efforts-buy-113911974.html This was starting to sound more and more like the Monty Python "Pet Shop" sketch.
EHH saw the writting on the wall, all the money in the world wouldn't let Canadian CPRR buy ownership to an American RR under this administration.
Its a loose loose for Washington, loss of corporate tax, loss of jobs (tax payers).
Note my post from last week, that Pfizer deal was the skull and cross bones warning to the M&A market. No matter what happens, big brother is still in charge.
What affect will CP's failure have on any future North American rail mergers for the forseeable future?
Victrola1 What affect will CP's failure have on any future North American rail mergers for the forseeable future?
there won't be any. What will poor Fred write about now. Seems like he and Hunter were the only 2 folks in favor.
WRONG, WRONG and WRONG. Corportate and employee taxes will be paid to Washointon and the States. If the merger went through the corporate taxes would have been lost because the corporate headquartes would have been moved to Canada. This the best that could happen. It was an attempt by EHH to steal an american company by a back door method and it did not work.
Entropy oltmannd Stating the obvious department: https://finance.yahoo.com/news/canadian-pacific-terminates-efforts-buy-113911974.html This was starting to sound more and more like the Monty Python "Pet Shop" sketch. EHH saw the writting on the wall, all the money in the world wouldn't let Canadian CPRR buy ownership to an American RR under this administration. Its a loose loose for Washington, loss of corporate tax, loss of jobs (tax payers). Note my post from last week, that Pfizer deal was the skull and cross bones warning to the M&A market. No matter what happens, big brother is still in charge.
I think right now a certain CEO is sitting in the Executive Suite in Calgary in an easy chair, sipping on a congac, savoring a Cuban Cohiba, and listening to Wilbert Harrison singing "Kansas City".
"Kansas City, Kansas City, here I come..."
Finally, they came to their senses. Just run the damn railroad and forget about building empires of dubious value. NS and CP can work together without a merger.
kgbw49 I think right now a certain CEO is sitting in the Executive Suite in Calgary in an easy chair, sipping on a congac, savoring a Cuban Cohiba, and listening to Wilbert Harrison singing "Kansas City". "Kansas City, Kansas City, here I come..."
Guess his legacy will never rise above what is scrawled on the bathroom walls of locomotives. Too bad; so sad.
It's been fun. But it isn't much fun anymore. Signing off for now.
The opinions expressed here represent my own and not those of my employer, any other railroad, company, or person.t fun any
Buslistthere won't be any. What will poor Fred write about now. Seems like he and Hunter were the only 2 folks in favor.
Don't forget about that RRsRGr8 guy (or whatever his name is). Although I have suspicions he was just a paid troll.
zugmann Don't forget about that RRsRGr8 guy (or whatever his name is).
Don't forget about that RRsRGr8 guy (or whatever his name is).
I think his real name must be Eugene
Greetings from Alberta
-an Articulate Malcontent
CP calls off merger attempt ? We may need to be careful in that we hHave no idea what EHH might have in mind ?
blue streak 1 CP calls off merger attempt ? We may need to be careful in that we hHave no idea what EHH might have in mind ?
Without Ackman's money it makes no difference what EHH has in mind - he won't have the funds to do it. Without Ackman's money EHH would still be in retirement.
Okay, so if you are EHH and want to grow the business, why wouldn't you want to haul export grain from the Upper Midwest to export ports on the Gulf - New Orleans, Mobile, Houston? Why wouldn't you want to haul auto parts from Ontario to factories in Mexico? Why wouldn't you want to haul frac sand from Western Wisconsin to Texas? Why wouldn't you want to haul finished autos and consumer goods for Ontario, Quebec, and for the New England states, New York, New Jersey and Philly as far as Buffalo on a single carrier haul from Mexico? I know he said for some reason he does not like the Mexico play. KCS is at about $9.6 billion market cap so it would probably take at least a 30% premium to acquire, or $12.5 billion. Is there not enough business there? Is KCS too highly leveraged? Any ideas why that would be bad business?
kgbw49Any ideas why that would be bad business?
Given the usual MO of folks like Ackman, I would opine it's because they can't turn a quick buck on it.
"Long term investment" isn't in their vocabulary.
Larry Resident Microferroequinologist (at least at my house) Everyone goes home; Safety begins with you My Opinion. Standard Disclaimers Apply. No Expiration Date Come ride the rails with me! There's one thing about humility - the moment you think you've got it, you've lost it...
CP has looked at KCS before, I was at an employee town hall where then CEO Rob Ritchie said it was very attractive, CP gave it a hard look, but it was just too expensive.
UlrichFinally, they came to their senses. Just run the damn railroad and forget about building empires of dubious value. NS and CP can work together without a merger.
tree68 kgbw49 Any ideas why that would be bad business? Given the usual MO of folks like Ackman, I would opine it's because they can't turn a quick buck on it. "Long term investment" isn't in their vocabulary.
kgbw49 Any ideas why that would be bad business?
- Paul North.
Rob Ritchie was last CEO of CO in 2006. I wonder if the equation has changed over 10 years? Time will tell, I guess.
CPRcst CP has looked at KCS before, I was at an employee town hall where then CEO Rob Ritchie said it was very attractive, CP gave it a hard look, but it was just too expensive.
KCS doesn't offer enough physical plant or profit to recover the investment unless it comes cheap. It's not worth anything like NS or CSX.
Kansas City Southern's market cap as of close today was about $10.24 billion.
In 2015, they had $2.419 billion in revenue and turned a net profit after taxes of $485 million, bringing 20.04% of revenue to the bottom line on a 66.4 Operating Ratio for the year.
Long term debt was a little over $2 billion at December 31, 2015.
Balance sheet equity at year end 2015 stood at $4.225 billion, so the simple return on balance sheet equity was 11.48%.
Of course, that is not market value.
To offer investors a 40% premium on $10.24 billion in market capitalization would take an offer of about $14.3 billion.
$14.3 billion is about 6 times annual gross revenues.
Assuming they continue to turn $485 million annually in net income, that is a simple return of about 3.4% on the $14.3 billion investment.
Granted, there might be some synergies - a larger railroad might not need as many locomotives, etc.
But for a larger railroad to make a move, they would have to figure out some sort of "traffic multiplier" from the combination to get the revenues and net income from the KCS property up significantly.
It seems to me, given where KCS goes - Dallas, Houston, New Orleans and the chemical coasts of Louisiana and Texas, plus Mexico - that the only way a merger of KCS makes sense is if one of the two eastern roads, who serve approximately 2/3 of the population of the US, figured out that there was enough of their own traffic to Dallas, Houston and Mexico that they could keep captive on what would be their own railroad, and drive up density that way, and likewise direct haul out of Mexico on single line service to everything east of the Mississippi.
Would that be enough to double traffic density on KCS? Could they keep enough traffic from Mexico on their lines to make it pay? Based on the fact that no other Class I has made a move to acquire KCS even though the old "pro-merger" STB rules would apply, I am guessing their traffic analysts have looked at it and concluded that at an approximately $10 billion market capitalization figure, the numbers don't add up.
Time will tell, I suppose.
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