Market Overview

Railroads Stocks Spiking On Canadian Pacific-Norfolk Southern Merger Report

Railroads Stocks Spiking On Canadian Pacific-Norfolk Southern Merger Report
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Update: In a press release, Canadian Pacific said there is no material news at this time. CP said it does not comment on market rumor and speculation.

  • Shares of big railroad companies were spiking on Monday afternoon.
  • The surge followed news about Canadian Pacific Railway Limited (USA) (NYSE: CP) considering a takeover of Norfolk Southern Corp. (NYSE: NSC).
  • On a possible industry consolidation, shares of Canadian Pacific were trading up more than 6 percent; shares of Norfolk, up more than 11 percent; shares of CSX Corporation (NYSE: CSX), up about 3.7 percent; shares of Kansas City Southern (NYSE: KSU), up almost 3 percent and shares of Union Pacific Corporation (NYSE: UNP), roughly 2 percent. Other railway stocks were also on the rise.
  • On Monday afternoon, a Bloomberg article informed that Canadian Pacific Railway, the second-largest biggest railroad in Canada, was considering a takeover of Norfolk Southern Corp., a big-cap U.S. carrier.

    The article assured that, in a move aimed at consolidating the North American industry, Canadian Pacific was raising financing and had “held early-stage merger talks with Norfolk Southern.”

    Related Link: Norfolk Southern Announces Service Changes In Response To Upcoming Positive Train Control

    However, the note added, “Discussions are preliminary and talks may not progress or lead to a deal,” sources familiar with the issue said. Representatives for both companies involved declined to comment on the issue.

    Author Ed Hammond noted that the acquisition of Norfolk Southern, the second-largest railroad in the Eastern region of the U.S., “would revive Canadian Pacific’s effort to build a transcontinental carrier after talks with CSX Corp. failed last year.”

    Hammond continued, “In floating the idea of a CSX tie-up, Canadian Pacific Chief Executive Officer Hunter Harrison upended the long-held view in the industry that it was fruitless to even discuss another merger because regulators would object.”

    Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.

    Image Credit: Public Domain

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