On Monday, Norfolk Southern Corporation (NYSE: NSC) officially announced that its from Canadian Pacific Railway Limited (NYSE: CP) had been rejected. The latest news follows an earlier rejection of the takeover by the company's board of directors on December 4.
Norfolk Southern's board unanimously rejected the deal, calling it "grossly inadequate" last week.
In the latest offer, Canadian Pacific had said it would pay $32.86 in cash and allocate 0.451 shares in the combined company for every share of Norfolk's stock. The previously denied buyout proposal included an unsolicited, non-binding, low-premium, highly conditional indication of interest to acquire the Company for $46.72 in cash and a fixed exchange ratio of 0.348 shares in a new company that would own Norfolk Southern and Canadian Pacific.
In a letter dated Monday and filed with the U.S. Securities and Exchange Commission, Norfolk Southern CEO Jim Squires and lead independent director Steven Leer told Harrison and Canadian Pacific chairman Andrew Reardon that the offer was "not in the best interest of the company and its shareholders."
Tensions High
Tensions have been heightened between both Norfolk and Canadian Pacific. CEO E. Hunter Harrison and activist investor Bill Ackman held a conference call, suggesting that "pride" was preventing Norfolk Southern from giving the offer reasonable consideration.
Nonetheless, the Calgary-based Canadian Pacific Railway giant will still benefit its shareholders even with the $28 billion rejected offer.
TheStreet's Jim Cramer is bullish on Northfolk Southern, recently saying, "Own Norfolk Southern because it's a very good company that happens to be temporarily stymied by strong dollar and a decline in coal, which will not get better, but they will fix it because they always do."
Norfolk Southern stated the latest offer is valued at $91.62 per share, whereas the initial offer was $92.06. However, Canadian Pacific said the bid would be worth $125 to $140 per share when the deal closes in May. The deal would've eased rail congestion in Chicago and was estimated to provide $1.8 billion in operational savings.
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