4.12.15

WITHOUT RELIABLE TRAINS, THERE IS NO SHAREHOLDER VALUE.

Canadian Pacific made a bid to purchase Norfolk Southern, whose language in rejecting the bid is instructive.
“We believe in our ability to generate greater shareholder value through execution of our strategy,” NS CEO James Squires says in a statement this morning.

NS says it would strengthen its financial performance, push its operating ratio below 70 in 2016 and below 65 by 2020 and drive double-digit earnings per share growth during the next five years.

Any merger proposal that reached the U.S. Surface Transportation Board would ultimately be rejected, Squires says, noting that the review process would cause “years of disruption and expense.” In the unlikely event that the combination were approved, it would come with so many strings attached — including open access — that it would reduce the value of the combined railroad.

Squires also criticized CP’s “sweat the assets” approach to railroading and questioned Calgary’s $1.8 billion merger synergy figure.

“We believe that Canadian Pacific’s short-term, cut-to-the-bone strategy could cause Norfolk Southern to lose substantial revenues from our service-sensitive customer base,” he says.
That's encouraging. Perhaps Norfolk Southern learned something about the way downsizing antagonizes shippers.

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