CALGARY, Alta.–Canadian Pacific has sent an offer letter to Norfolk Southern Corp. (NS) proposing a business combination that would create a transcontinental railroad “with the scale and reach to deliver improved levels of service to customers and communities while enhancing competition and creating significant shareholder value.”
The proposal would result in a company with the potential for faster earnings growth than either CP or NS could achieve on their own, all the while maintaining a strong investment grade credit rating, said a release.
CP said it strongly believes that the combined railroad “would offer unparalleled customer service and competitive rates that will support the success of the shippers and industries it serves, and satisfy the U.S. Surface Transportation Board and Canadian regulators.”
Among the combined company’s key innovations is a new approach to terminal access that would change the status quo in U.S. rail transportation. In the event the new company failed to provide adequate service or competitive rates, it would allow another carrier to operate from a point of connection over the combined company’s tracks and into its terminals.
In addition, the new company would give shippers the choice of where they can connect with another railroad along its network, bringing an end to the practice of “bottleneck pricing” to a large number of shippers in the U.S. while further enhancing competition.
Furthermore, a combination would alleviate the long-standing issue of congestion in Chicago, which seized into gridlock in the winter of 2014 and hobbled economic growth. By channeling rail traffic away from Chicago, CP would create fluid routes through under-utilized hubs and free up much-needed capacity for other railroads that pass through the city, providing them with new, efficient and competitive service options for their own customers, the railway said.
A combined CP/NS would create capacity for all shippers without creating the need for more infrastructure.
CP said it hopes the NS executive leadership team and the Board of Directors give this offer due consideration, and looks forward to a thoughtful dialogue on creating a new industry leader.