CP revises its Norfolk Southern offer to include more shares

Canadian Pacific Railway has rejigged its offer to buy Norfolk Southern in an attempt to appease regulatory concerns that the deal would lessen competition by creating the largest rail company in North America.

CP offered Norfolk Southern shareholders a package last month worth about $92.06 US per share, including $46.72 in cash and 0.348 shares in the new company.

Norfolk rebuffed that offer as inadequate, and on Tuesday CP tried again, revising its offer to include only $32.86 US in cash per share but more equity — 0.451 shares in the combined company for every Norfolk Southern share.

That was an attempt to appease U.S. regulators, who might have been concerned that the deal would have concentrated control of a major chunk of America's rail network in the hands of an unknown new player.

'More  uncertain and risky'

U.S. regulators haven't approved any major railroad mergers in more than 15 years. One of the only sizeable deals in recent years was when Warren Buffett's Berkshire Hathaway conglomerate bought BNSF Railway in 2010.

The U.S. rail network is made up of 21 regional railroad companies and 510 local ones, but is dominated by four big names: BNSF, Norfolk Southern, Union Pacific and CSX, which CP tried to buy last year.

CP's offer filtered out early Tuesday morning, but within hours Norfolk's board had already rejected the revised offer, noting that it's actually worth less in dollar terms than the original deal they rejected for being too cheap.

"Canadian Pacific's revised, reduced proposal is not only less than what the Norfolk Southern board has already found to be grossly inadequate, it is even more uncertain and risky given the decrease in the cash consideration," CEO James Squires said.

Shares of Norfolk Southern, based in Norfolk, Va., shed $3.54, or 3.9 per cent, to $87.99 US about an hour after the market opened.