Canadian Pacific Railway (CP – Get Report) stock is advancing by 5.72% to $141.99 in late afternoon trading on Monday, as it explores an acquisition of Norfolk Southern (NSC), sources told Bloomberg.
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A deal between CP and Norfolk could have advantages for both companies, says Hatch.
Shares of CP (CP.TO) and Norfolk Southern (NSC.N) surged on Tuesday amid a report that the companies are in early-stage merger talks. A CP spokesman would not comment.
Canadian Pacific Railway’s quest for a record merger depends on a blessing from the same US agency that thwarted the last effort to build a transcontinental railroad.
The discussions mark the Canadian railroad operator’s second major consolidation play in little over a year, as it once again seeks to gain control of a railroad network that would give it access to the US eastern seaboard and rail hubs like Chicago. CP chief executive officer Hunter Harrison has said a merger would improve service, efficiency and capacity, but that he could not find a willing partner. Norfolk Southern Railway Company is primarily engaged in the rail transportation of raw materials, intermediate products, and finished goods primarily in the Southeast, East, and Midwest and, via interchange with rail carriers, to and from the rest of the United States.
Trading of NS stock was temporarily halted yesterday after the news broke.
“Everybody has to be on the same page on the railroad side and be able to sell the benefits of this to shippers because they’re going to be potentially nervous”, said David Tyerman, an analyst with Canaccord Genuity Inc.
In a recent survey, 6 analysts were expecting an average of $1.55 earnings per share for Norfolk Southern Corporation, for the 4 quarter of the fiscal year ending in 2016.
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The NY Times adds that Norfolk Southern and its primary rival CSX operates in the eastern half of the U.S. Ironically, Canadian Pacific is the smaller of the two companies even though it’s reportedly leading the talks. The rating is an average of the various different ratings given by analysts and brokers to Norfolk Southern Corporation, and then averaged into one rating by a team of analysts at Zacks in Chicago, Illinois. Autos and auto parts contributed about 9 percent. The Company owns a freight railroad, Norfolk Southern Railway Company. Canadian Pacific fell 20 per cent this year through Friday.
