Canadian Pacific Railway Ltd is exploring a potential acquisition of USA peer Norfolk Southern Corp, a person familiar with the matter said on Monday.
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Following the news, Norfolk Southern stock gained 13.45% of its value, its greatest intraday gain since 2011. Representatives for Canadian Pacific and Norfolk declined to comment.
“There is no material news pending at this time”, Canadian Pacific said in a statement, citing a request from the Investment Industry Regulatory Organization of Canada that it respond to the day’s stock trading. A CP spokesman would not comment.
Moorman recently stepped down as executive chairman, leaving James Squires, already Norfolk Southern’s president and CEO, as its new chairman, effective October 1.
Shares of big railroad companies were spiking on Monday afternoon.
“I think the odds are low”. The Standard & Poor’s 500 Railroads Index, which tracks four US carriers, rose as much as 5 per cent to erase an earlier drop.
As in the case of the CSX deal, analysts warned there could be a few hurdles around any deal with Norfolk Southern.
Seidl said Cowen believes Norfolk Southern’s management “is less likely to quickly rebuff CP’s offer in today’s environment than in the case of CSX’s management previous year, when coal, however weak then, was still not as bad as today”.
Norfolk Southern jumped 11 percent, the most since 2008, to $88.62 at the close in New York, while Canadian Pacific’s 5.7 percent rally to C$188.79 in Toronto marked the shares’ biggest gain since 2013.
The deal would be heavily scrutinized by regulators, who have seen consolidation leave the rail industry with a few small players and who played a role in squashing the Canadian Pacific/CSX tie-up previous year.
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Norfolk Southern recently reported that coal revenue for the third quarter slipped 23 percent from the same quarter a year ago.
