OTTAWA: The failure of Canadian Pacific Railway Ltd.’s proposed takeover of Norfolk Southern Corp. has freed up a significant amount of cash, allowing the railway to hike its dividend and buy back shares.
Why Hunter Harrison’s status as a ‘legend’ remains untarnished by the CP Rail-Norfolk Southern merger failure
CP Rail’s failed attempt to acquire Norfolk Southern is a rare disappointment for Harrison, but his quest for a deal may not be over. Read on
CP announced Wednesday that it will buy back up to 6.91 million shares, or about five per cent of its public float, while also boosting its quarterly dividend to $0.50, an increase of 43 per cent.
Chief executive Hunter Harrison was candid when asked about the company’s US$27-billion offer for Virginia-based Norfolk Southern, which fell apart after several stakeholders, including the U.S. Army and the Department of Justice, voiced their opposition.
“A lot of people were against the transaction, some of the customers that I visited with, and what they were against was not mergers, they were against how mergers were executed in the past,” Harrison said.
“I used to hate to get a spanking for something my sister did, but there’s only so much we can do.”
Harrison added that he still believes consolidation is necessary in the longer term to reduce congestion and improve service for shippers, but acknowledged that it won’t happen before he retires in 2017.
“Is it frustrating? Yeah, it’s frustrating, but I would predict post-Harrison it’s going to happen,” he said. “We just have to develop a little patience, which I’m not really endowed with, but it’ll happen one day soon.”
Despite the tepid economy, CP reported a record first-quarter operating ratio — a key measure of efficiency for railroads, where a lower number is better — of 58.9 per cent, down 430 basis points.
Adjusted earnings rose to $2.50 per share, beating the average analyst estimate of $2.42, while revenue fell four per cent to $1.59 billion.
