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Canadian Pacific halts bid to buy Norfolk Southern

HOUSTON, April 11, 2016 (PCW) -- Canadian Pacific said Monday that it is ending its nearly $30 billion takeover bid for Norfolk Southern, less than six months after it had originally offered to buy the rival railroad.

Norfolk Southern had rejected Canadian Pacific's bids, saying that Canadian Pacific needed to raise its offer and convince a rail regulator that the structure of the deal could be approved.

Canadian Pacific is dropping the deal before the federal Surface Transportation Board could rule on its proposed structure and before Norfolk Southern shareholders vote whether to support merger talks.

Canadian Pacific CEO E. Hunter Harrison said Monday that there was "no clear path to a friendly merger at this time."

Merger Wave

The deal would have expanded Canadian Pacific's rail network across the US, and many observers believed it would have triggered a wave of railroad mergers.

Canadian Pacific operates railroads in Canada and parts of the US Midwest and South, while Norfolk Southern operates railroads along the East Coast, Midwest and South. Canadian Pacific first offered to buy Norfolk Southern in November.

Canadian Pacific had asked regulators to evaluate its proposed structure of a voting trust for the deal that would have installed Harrison as Norfolk Southern's CEO while the overall deal was reviewed.

The US Justice Department said Friday that the proposed structure wouldn't preserve the independence of both railroads, as required by rail merger rules.

No major railroad mergers have been approved since the federal Surface Transportation Board adopted tough rules for them in 2001.

Throughout the merger conversations, Norfolk Southern executives had argued that its shareholders and customers would be better off if the railroad remained independent.

Shares of Norfolk Southern Corp. fell $3.03, or 3.7%, to $78.46 in midday trading Monday. US shares of Canadian Pacific Railway Ltd. gained $4.94, or 3.7%, to $139.73. -- Donna Todd

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