Norfolk Virginia USA - Norfolk Southern Corporation (NS) on Wednesday rejected a sweetened bid from Canadian Pacific Railway Ltd. (CP), moving the cross-border railroad takeover effort closer to a proxy fight.
 
The decision leaves CP Chief Executive Officer Hunter Harrison with a choice, abandon his quest to create a transcontinental railroad, or go directly to NS's investors to force a boardroom change, as he has said he may do.
 
"Your latest revised proposal is grossly inadequate," NS said in a letter to CP, echoing language that it has used in previous rebuffs.
 
The board's decision was unanimous, the U.S. carrier said.
 
CP is reviewing NS's response, spokesman Martin Cej said by email.
 
He declined to elaborate.
 
The Calgary-based railroad said last week that its most recent proposal added an additional payout of as much as $3.4 billion.
 
The rest of the offer was similar to a revised plan for US$32.86 in cash and 0.451 share in the combined company for each share of NS.
 
That offer valued NS at about US$27 billion.
 
Shares of NS rose 78 cents to close Wednesday at US$86.85 in New York.
 
The shares gained 7.8 percent from 6 Nov 2015, the last trading day before Bloomberg News reported CP's interest in a deal, through Tuesday, valuing the company at US$25.7 billion.
 
CP shares increased $2.22, or 1.76 percent, to US$128.50.
 
Harrison, 71, has said he believes a proxy fight is likely if NS's management and board continue to refuse to discuss a takeover.
 
The pursuit of NS was the result of investors urging CP to pursue a merger and apply its efficiency gains to another railroad, Harrison has said.
 
NS has turned aside CP three times.
 
The Norfolk, Virginia-based, railway reiterated Wednesday that it believes the merger and the voting trust proposed by CP wouldn't be approved by U.S. regulators.
 
NS is the second-largest railroad in the eastern U.S., and CP is No. 2 in its home country.
 
CP's latest bid included a contingent-value right, which would entitle holders to receive a cash payment from CP equal to the difference between the combined company's average share price during the six-month period ending 30 Oct 2017, and US$175 a share, up to a maximum of US$25.
 
That offer would be inadequate even if the right's value were at the high end, NS said Wednesday.
 
"Our financial advisers believe that the CVR would trade at a significant discount," the railroad said in its letter to Harrison and CP Chairman Andrew Reardon.
 
"You continue to publicly declare that we are not "engaging" or "meeting" with you," NS CEO Jim Squires and Lead Director Steven Leer said in the letter.
 
"There is no basis to meet until you both make a compelling offer and address the regulatory issues."
 
Frederic Tomesco.