U.S. railway Norfolk Southern has rejected another new marriage proposal from Canadian Pacific Railway (CP), leaving the Calgary-based rail firm to “review its strategic alternatives.”

Norfolk Southern said Wednesday its board of directors has “unanimously” rejected CP’s revised Dec. 16 proposal, which offered US$32.86 per share in cash, a fixed exchange ratio of 0.451 shares in a new company that would own both CP and Norfolk, and 0.451 of a contingent value right (CVR) in the new company.

CP on Dec. 16 said its offer of a CVR — which could be converted to cash as a protection for shareholders against the company’s stock value dropping below a set point — boosted the value of CP’s deal by up to $3.4 billion.

Norfolk, in a letter to CP brass dated Wednesday, said its board “has unanimously determined (CP’s) 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.”

CP officials, in a statement later Wednesday, said it’s “apparent that neither the executive leadership at (Norfolk) nor its board of directors are willing to sit down in an open and constructive dialogue about this transformational opportunity.”

The interests of Norfolk’s board, CP said, “are not aligned with the best interests of (Norfolk) shareholders. Therefore CP will review its strategic alternatives.”

Merging CP and Norfolk would need the approval of the U.S. Surface Transportation Board, which since 2001 has had tighter criteria for rail mergers.

Norfolk, in its letter, said that while CP “continue(s) to publicly declare that we are not ‘engaging’ or ‘meeting’ with you… (t)here 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.”

Norfolk said it had urged CP to seek a declaratory order regarding the legality of putting CP into a voting trust under the proposed merger structure. “Your decision not to seek an order shows a lack of confidence in your proposed structure,” Norfolk said. — AGCanada.com Network