Received via e-mail
Norfolk Southern Corporation (NYSE: NSC)
(“the Company”) today announced that its board of directors has
unanimously rejected Canadian Pacific’s
(TSX:CP)
(NYSE:CP) Dec. 16, 2015, publicly disclosed, revised proposal to
acquire the Company for $32.86 in cash, a fixed exchange ratio of 0.451
shares in a new company that would own Canadian Pacific and Norfolk
Southern, and 0.451 of a Contingent Value Right.
The following is the text of the letter that was
sent on Dec. 23, 2015, to Canadian Pacific’s Chief Executive Officer, E.
Hunter Harrison, and its Chairman of the Board, Andrew F. Reardon.
December 23, 2015
Mr. E. Hunter Harrison Mr. Andrew F. Reardon
Chief Executive Officer Chairman of the Board
Canadian Pacific Railway Canadian Pacific Railway
7550 Ogden Dale Road S.E.
Calgary, AB T2C 4X9
Canada
Dear Mr. Reardon and Mr. Harrison:
The board of directors
of Norfolk Southern has carefully reviewed your latest revised proposal,
which you publicly disclosed on December 16, but have not otherwise
communicated to us. That review was conducted with the assistance of our
independent financial, legal and regulatory advisors. In its review,
the board noted that the only change from your prior proposal was to
include a Contingent Value Right (“CVR”).
The board of Norfolk
Southern has unanimously determined that your latest revised proposal is
grossly inadequate, creates substantial regulatory risks and
uncertainties that are highly unlikely to be overcome, and is not in the
best interest of the Company and its shareholders. This would be the
case even if the CVR had a value at the high end of the range suggested
in your publicly filed presentation. In fact, our financial advisors
believe that the CVR would trade at a significant discount.
In addition, you have
not addressed the significant regulatory issues that we have previously
identified. We do not believe that your voting trust structure would be
approved. As you know, our view reflects careful analysis by our
regulatory experts and is fully supported by two former Surface
Transportation Board (“STB”) Commissioners. You have a path to seek a
declaratory order from the STB as to whether the voting trust structure
that you proposed could work. The STB has clear, statutorily-established
authority to issue declaratory orders to remove uncertainty, and there
is precedent for it in the voting trust context. No involvement by
Norfolk Southern is required for you to seek a declaratory order
regarding the legality of putting Canadian Pacific into a voting trust
under your proposed structure. Your decision not to seek an order shows a
lack of confidence in your proposed structure.
You continue to publicly
declare that we are not “engaging” or “meeting” with you. There is no
basis to meet until you both make a compelling offer and address the
regulatory issues, which you have the ability to do by seeking a
declaratory order. We also note your repeated public statements that you
are not willing to increase your offer regardless of whether we were to
meet.
The Norfolk Southern
board of directors is focused on protecting the interests of our
shareholders. It would be inconsistent with the duties of the board to
pursue a risky and uncertain offer that substantially undervalues the
Company. Accordingly, the board of directors has unanimously rejected
your latest revised proposal.
Sincerely,
/S/ /S/
Jim Squires Steven Leer
Chairman, President and Lead Director
Chief Executive Officer
Morgan Stanley & Co. LLC and Bank of America Merrill Lynch are acting as financial advisors to Norfolk
Southern Corporation and Skadden, Arps, Slate, Meagher & Flom LLP,
Hunton & Williams LLP and Morrison & Foerster LLP are acting as
legal advisors.
About Norfolk Southern
Norfolk Southern Corporation
(NYSE: NSC) is one of the nation’s premier transportation companies.
Its Norfolk Southern Railway Company subsidiary operates approximately
20,000 route miles in 22 states and the District of Columbia, serves
every major container port in the eastern United States, and provides
efficient connections to other rail carriers. Norfolk Southern operates
the most extensive intermodal network in the East and is a major
transporter of coal, automotive, and industrial products.
Forward-Looking Statements
Certain
statements in this press release are forward-looking statements within
the meaning of the safe harbor provision of the Private Securities
Litigation Reform Act of 1995, as amended, including but not limited to
statements regarding the indication of interest made by Canadian Pacific
Railway Limited. In some cases, forward-looking statements may be
identified by the use of words like “believe,” “expect,” “anticipate,”
“estimate,” “plan,” “consider,” “project,” and similar references to the
future. Forward-looking statements are made as of the date they were
first issued and reflect the good-faith evaluation of the Company’s
management of information currently available. These forward-looking
statements are subject to a number of risks and uncertainties, many of
which are beyond the Company’s control, including future actions that
may be taken by Canadian Pacific Railway Limited in furtherance of its
unsolicited proposal. These and other important factors, including
those discussed under “Risk Factors” in the Company’s Form 10-K for the
year ended December 31, 2014, as well as the Company’s other public
filings with the SEC, may cause our actual results, performance or
achievement to differ materially from those expressed or implied by
these forward-looking statements. Forward-looking statements are not,
and should not be relied upon as, a guarantee of future performance or
results, nor will they necessarily prove to be accurate indications of
the times at or by which any such performance or results will be
achieved. As a result, actual outcomes and results may differ
materially from those expressed in forward-looking statements. We
undertake no obligation to update or revise forward-looking statements,
whether as a result of new information, the occurrence of certain events
or otherwise, unless otherwise required by applicable securities law.