The Successful Investor Hotline – Friday, December 11, 2015

Article Excerpt

CANADIAN PACIFIC RAILWAY LTD., $169.77, Toronto symbol CP, has revised its takeover offer for U.S.-based railway Norfolk Southern Corp. (New York symbol NSC). The combined firm would be North America’s largest railway, with more than 56,000 kilometres of track. Buying Norfolk would also give CP greater access to ports on the U.S. Gulf Coast and Atlantic Ocean. Under the new deal, Norfolk shareholders would receive more stock and less cash: $32.86 U.S. a share in cash plus 0.451 of a CP share for each Norfolk share held. That would give them 47% of the combined company, compared to 41% under the original offer. Based on CP’s share price, the new offer is worth $26.4 billion U.S., which is equal to 1.4 times the company’s $26.3-billion (Canadian) market cap. CP feels it can cut the combined firm’s annual costs by $1.8 billion U.S. Norfolk has rejected the new offer. As well, its stock is trading at 1.0% above the value of CP’s deal,…