I knew it , with them running trains on eachothers tracks lately . Go to www.ble.org and read some of that stuff . CPR set to become an acquisition target, analysts say TORONTO -- If investors approve the spinoff of Canadian Pacific Railway, the company will begin the new century as it began the last one: as an independent railway company, the National Post reports. The question is, does it have a future? Faced with low commodity prices and tough competition both from rival railways and from the trucking industry, CPR has been struggling to make itself more profitable. But observers believe the company that helped meld Canada together is set to become an acquisition target. Indeed, Dick Davidson, the chief executive of Union Pacific Corp., a leading U.S. railway, told analysts recently his company has already taken "a hard look" at buying CPR. And just last month, Paul Tellier, the chief executive of Canadian National Railway Co. said CN would also consider buying CP, provided the proper regulatory framework is put in place. "There is no question that combining this railroad with CN would result in a tremendously more efficient combined operation," Avi Dalfen, an analyst at Research Capital Corp., said yesterday. For their part, officials at CPR's parent company have been coy about the issue. "If there is going to be serious consolidation in the railway industry in North America, in one form or another CPR would have to be involved," said David O'Brien, chief executive of Canadian Pacific Ltd. "So I don't think [the spinoff] changes anything except that now they have their own currency in terms of their own shares and if they see opportunities that make sense, they can exploit those." With a network of more than 14,000 miles of track spanning both the United States and Canada, CPR is regarded as one of North America's leading players, accounting for about 30% of the parent company's total sales in 1999. Founded in 1881 on the idea of linking Canada's fertile heartland with the populous East, the CPR introduced the first trans-Canada service in 1886, ushering in a new era of prosperity. Over the years, the company branched out into other areas, including shipping, aerospace, hotels, real estate development and oil. While being part of a major conglomerate may have helped CPR in the early years, more recently it has been a hindrance. Over the past decade, the North American railroads have gone through a period of major consolidation. But instead of taking advantage and making some cheap acquisitions, CPR mostly stuck to its knitting. "There were lots of major transactions that CPR was not party to, and that resulted in many of its peers becoming much larger companies," said Research Capital Corp.'s Mr. Dalfen. "Being part of a conglomerate has not helped CPR." Because it missed that opportunity, CPR cannot be counted among the leading North American railroads, Mr. Dalfen said. Observers cautioned that under the current timetable, the spinoff of CPR will not take place until the fall, and the competitive landscape could change significantly between now and then. Another consideration is the moratorium on mergers by U.S. railroads that is expected to end this summer. The moratorium was put in place by U.S. regulators to give them more time to rewrite the rules. It effectively killed all major transactions, including CN's planned combination with Burlington Northern Santa Fe Corp. (Next Story) CP's O'Brien rides off into sunset TORONTO -- As a lawyer of some repute in the hard-nosed world of corporate turn-arounds, it should come as no surprise that David O'Brien refused to be teary yesterday, the National Post reports. Nonetheless, as the chairman, president and chief executive of one of Canada's most storied conglomerates announced its dissolution yesterday, he did confess to being one-tenth sentimental. "It's nine parts exhilaration and one part nostalgia," he said. "I feel very good about the fact that I arrived at Canadian Pacific in 1995 and it was worth about $6.8-billion in the market and today it's worth over $17-billion. So in business terms it's a great success, the only thing that's disappearing today is a holding company structure." Mr. O'Brien said he will now "ride off into the sunset" as his job disappears. The 59-year-old made his way into the corner office at CP via the oil and gas division. After working in Montreal as a corporate lawyer at Ogilvy Renault, he joined Petro-Canada in Calgary in 1978, returned briefly to Montreal to head Noverco Inc. in 1989, and then jumped back out West to lead PanCanadian in 1990, becoming chairman, president and CEO in 1992. During his tenure, he shook up the dowdy oil company by cutting staff, slashing operating costs and expanding its exploration program. Among other unorthodox steps, he sought out partners for frontier exploration, going so far as to link up with the then-Soviet Russian government to produce oil in Siberia. By the time he left in 1994 to take over as president and chief operating officer at CP Ltd., PanCanadian's production had soared and it had become the single largest contributor to CP's bottom line. While often criticized for moving too slowly on the much desired breakup of CP, Mr. O'Brien was nonetheless active in reshaping the company. It sold its interest in United Dominion Industries Ltd. in 1995, the following year it sold off real estate subsidiaries Marathon Realty Co. Ltd. and Centrixx Realty Holdings, and later dumped its interest in Laidlaw Inc., which Mr. O'Brien still likes to note was done at the top of the market. At the same time, CP was building up other divisions, acquiring steamship lines and hotels. Yesterday, Mr. O'Brien said the strategy of bulking up divisions made possible the spinning off of the various units because each was large enough to stand on its own. "I knew it wasn't viable the way it was over the long term, but it was only over time that I gradually came to the conclusion this was the best option. That option wasn't available in the early days," he said. "As I went through the thinking, you know at one time people said, 'well spin off PanCanadian,' and then I came to the conclusion once you started to do so, probably you were into a slow dance of doing more and more, and wasn't it great if you could do it all at once." (Next Story) Back to News Index Back to News Index
Just a question I have. If CN does buy CP, would both the Canadian and the US both have to approve the deal? And if the STB declines, would CN still be intersested? So many questions, too few ansewrs. Eric
<BLOCKQUOTE>quote:</font><HR>Originally posted by milwfreak: Just a question I have. If CN does buy CP, would both the Canadian and the US both have to approve the deal? And if the STB declines, would CN still be intersested? So many questions, too few ansewrs. Eric<HR></BLOCKQUOTE>Thats exactly what I was wondering , what say does the STB have since both companies are Canadian .
I believe that the STB would have to give it's blessing to a CN/CP merger, due to the amount of trackage operated in the US by both companies. What I think is really interesting is that the first thing mentioned in the first article was UP looking into merging CP. Isn't the current moratorium a direct result of UP's opposition to BNSF+CN? My, how times have changed. Dwight
You had better believe that the US's Surf Board would have a say in the merger of the CN and CP if it were proposed. I think it would be most unlikely to approve such a merger since the acquisition of IC by CN and the proposed acquisition of WC. To add the Soo Line to CN's US properties would not pass anti-competitive muster. I wonder how the Canadian Wheat Board would view such a merger? The fools are going to eventually merge themselves into two systems before they fall apart of their own weight, but I doubt if both Canadian carriers will be in the same system.
There has been mumblings from the Canadian Government concerning the monopoly a CP/CN merger would create... anyways...not much us little guys can do about it.
From what I read, CP isn't merging with CN, the article says that CP is going to be cutting back on the network once more by trimming off some of the prairie branches, creating some Short and Regional Lines(which will most likely to go to Rail America).
When talking to a CPRail conducter this past Saturday, I was told that CP may merge with UP. This is just a rumor, but wow, CP and UP would both benefit in the Wisconsin/Minnesota region if they did merge. Who knows?
