Road & Rail
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KSU $284
CNI $120 CP $70 |
The Kansas City Southern saga: Canadian Pacific once again in the driver's seat
(13 Sep 2021) It seems as though we have been discussing the twists and turns of the Kansas City Southern (KSU $284) saga for years, yet the planned sale of the company just came to light about six months ago. First, it looked as though Canadian Pacific (CP $70) would purchase the plum north-south rail for $25 billion plus the assumption of $4 billion in debt. At the time, KSU had a market cap of just $19 billion. Then came archrival Canadian National Railway's (CNI $120) $33.6 billion bid, and a promise to keep KSU headquartered in Kansas City—something Canadian Pacific was not willing to do. Then US regulators got involved, with the Surface Transportation Board refusing to allow CN to set up a voting trust to acquire the rail; meanwhile, CP already had a voting trust approved and in place. This virtually guaranteed that the Canadian National deal would be shot down by US regulators. Realizing this, Kansas City Southern has now gone back and accepted a slightly sweetened, $31 billion bid from Canadian Pacific. There will be a breakup fee, however, which will place a cool $1.4 billion in Canadian National's pocket, though they would have rather owned the crucial rail, which would have given them unfettered rail access between Canada and Mexico. This latest deal, which is essentially the original one announced this past spring, will almost certainly be approved by all parties involved, including the US government. Sadly, this will lead to Kansas City Southern's headquarters moving from Kansas City to Calgary, Alberta, Canada. We have avoided this ordeal altogether by owning a different rail in the Penn Global Leaders Club: Union Pacific Corp (UNP $207). With fresh money and a need for industrials within a portfolio, it is still our top choice. That being said, anyone wishing to own the only rail which will travel north/south from Canada all the way to Mexico, an investment in Canadian Pacific would be—in our opinion—a relatively safe bet. |
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KSU $298
CNI $113 CP $81 |
The latest developments in the Kansas City Southern saga
(31 May 2021) When Canadian National Railway (CNI $113) stunned the industry with its $30 billion bid for Kansas City Southern (KSU $298), we fully expected rival Canadian Pacific Railway (CP $81) to up its prior $25 billion bid. Instead, the rail—which arguably needs the American north-south tracks of KSC more than Canadian National—stuck by its original offer. It also sent a message to Kansas City Southern: take our deal or lose the regulatory battle in the US. The Kansas City-based rail responded by telling Canadian Pacific to take a hike—and eat the $700 million deal breakup fee. At the heart of the issue are overlapping routes (Canadian National Railway has more) and stricter merger standards adopted in 2001 by the Surface Transportation Board (STB). The agency, which must approve or deny the merger, now states that railway mergers must be in the public interest; the older standard simply stated that a deal must not hinder competition. Canadian Pacific's plans? Wait out the ruling, which it expects to be negative, then swoop back in with its original deal. This is a really tough call, as we see a 50/50 chance for ultimate approval by the STB. In the meantime, KSC seems too expensive (its price has risen to within 9% of the acquisition offer price), we don't like Canadian Pacific's tactics (and it seems fairly valued), and Canadian National will probably take a share price hit if the deal is shot down. That being said, we do like Canadian National's reach, which extends throughout Canada and all the way south to the Mexican border. It agreed to sell some of its southern-most lines to acquire KSC, but that would be a moot point if the deal fails. Of the major rails, CNI at $112.57 seems like the best bet right now for investors. |
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CNI
KSU |
A new twist—and a new Canadian player—in the Kansas City Southern saga
(20 Apr 2021) Last month we reported on the probable loss of one of America's storied railroads—Kansas City Southern (KSU $298)—as it agreed to be acquired by larger rival to the north, Canadian Pacific (CP $357). The plan called for the $47 billion Canadian rail to buy the north/south American rail for $25 billion plus the assumption of another $4 billion in debt (equivalent to roughly $275/sh). We also noted that last fall KSU rejected a bid by the Blackstone Group (BX $80) to pay shareholders $208/sh to take the firm private. We thought the CP deal was a fait accompli until this week's shocker from an even larger Canadian rail. Canadian National Railway (CNI $110), which has a market cap of nearly $80 billion, has made a $30 billion bid for KSU, valuing the deal at $325/share and promising to keep KSU's headquarters in Kansas City. While the terms are more favorable for KSU shareholders, there is another factor which will almost certainly come into play: due to a bit more overlap, Canadian National will face a higher regulatory hurdle, with no guarantee of ultimate approval on either side of the border. Despite its smaller size, Kansas City Southern is a coveted jewel of the industry, operating as the only rail going into both Canada to the north and Mexico to the south. As USMCA picks up steam, the importance of one company's ability to transport raw materials from Canada, American farm goods to Mexico, and autos and industrial products back from Mexico cannot be overstated. It even operates a rail link along one side of the Panama Canal. Executives at KSU said they are reviewing the deal and would respond to CP in due course, but shareholders are already cheering the offer: KSU shares were trading up 16% after terms of the deal were announced. While we would like to see KSU remain independent, odds are very high that one of these deals will ultimately be approved. And, quite frankly, the powerhouse which would be created from a merger is exciting to ponder. Our gut instinct, based on over two decades of following the rail stocks, tells us that the Canadian National Railway merger would offer the best comprehensive outcome—except for Canadian Pacific, of course. |
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CP
KSU |
America is losing one of its great and storied railroads as Canadian Pacific set to acquire Kansas City Southern
(22 Mar 2021) It has been twelve years since Warren Buffett's "affinity for railroads as a kid" led him to take a great American rail, Burlington Northern Santa Fe, private, and we still aren't over it—BNI was one of our favorite holdings in the Penn Global Leaders Club. Now, investors are about to lose another great name in the space: Canadian Pacific (CP $370) plans to acquire Kansas City Southern (KSU $260) for $25 billion plus the assumption of roughly $4 billion in debt. As a north-south rail, Kansas City Southern has been a major play on trade between the United States and Mexico: the firm owns 3,400 route miles in the US, and an interest in 3,300 miles of rail in Mexico. Canadian Pacific is a $50 billion rail which operates 12,500 miles of track throughout most of Canada and into parts of the Northeastern and Midwestern US. While it will be tough to say goodbye to KSU, the deal actually makes a lot of sense. As Canada became the last nation to approve the new USMCA trade pact last March, the new rail will be a beast, controlling a north-south route throughout the pact's domain. For the first time ever, one rail will connect all three nations. Current CP CEO Keith Creel will head up the new giant, which will be based out of Calgary, Alberta. At least investors will still have the ability to own Kansas City Southern, albeit through CP shares—last fall the rail rejected a $208/share bid from the Blackstone Group which would have taken the firm private. Although there will be a regulatory fight, this acquisition will ultimately be approved. If the USMCA lives up to its potential, Canadian Pacific will be in a great position to streamline its operations, improve profitability, and grow its market share. While we don't own CP, we are bullish on the shares, which currently sit around $370. |
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NAV
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Navistar International jumps 55% as VW looks to make a big move into the US commercial vehicle market. (31 Jan 2020) Shares of commercial bus and truck maker Navistar International (NAV $21-$37-$40) opened Friday's session trading up by 55% after the Illinois-based company received an unsolicited buyout offer from Traton, Volkswagen's (VWAGY) recent trucking spinoff. Navistar's board said it is in the process of reviewing the offer, and that there is certainly no guarantee a deal can be reached. It is clear that VW wants to move into the lucrative US commercial truck market, and this would give them a strong platform to do so. Traton sold nearly a quarter-of-a-million units around the world last year, while Navistar, under its International® brand name, sold approximately 70,000 buses, trucks, and defense-related vehicles in the US. It should also be noted that Traton already owns 17% of NAV and holds two seats on the company's 17-member board. Another great example of a decent company with little enthusiasm circling around it by investors or analysts suddenly getting a huge price pop due to a takeover bid. Investing in a company solely based on takeover hopes is a fool's errand, but it can certainly be an important part of any equation when evaluating the fundamentals of a company.
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UNP
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CSX may be "puzzled" by the environment, but our rail posted a strong quarter. (18 Jul 2019) Admittedly, we got a little worried about our Union Pacific (UNP $128-$172-$180) position after CSX (CSX) announced a pretty rotten quarter. In fact, UNP shares fell (about half as much as CSX's) in sympathy with that report. The Omaha-based railroad beat expectations, however, and all of the recent losses suffered by UNP shares were wiped clean immediately following the earnings release. Against analyst expectations for a drop in revenues to $5.58 billion, the company generated sales of $5.6 billion in the quarter; earnings per share were expected to come in at $2.12, but instead rose to $2.22. While total carloads decreased 4%, identical to CSX's decrease, increased efficiencies at the carrier offset those declines. As usual, one of our favorite American CEOs, Lance Fritz, delivered for investors. Fritz did mention the uncertainty which will be in place until the USMCA is passed, a viable trade agreement is made with China, and Japan/Europe trade issues are tackled. Fair points.
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JBHT
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JB Hunt's decent quarter allays—somewhat—fear of a coming recession. (16 Jul 2019) When a recession is looming, one typical early indicator is weakness in the transports, especially within the rail and trucking industries. Well, one of the top surface transportation companies in North America just reported earnings, and investors breathed a sigh of relief. JB Hunt (JBHT $84-$97-$130), with its extensive operations through the three USMCA countries, reported revenues of $2.26 billion (a 5.7% increase Y/Y), and a net profit of $1.37/share (versus $1.35 expected). What led to the 5% spike in the shares, however, was the relatively rosy outlook management gave for the remainder of the year. While the intermodal cargo business was soft in the first six months of 2019, analysts left the conference call confident that the second half would see improvement. It seems as though the economy may be softening just enough to give investors what they want—a rate cut or two by the Fed. In the midst of the ongoing trade war saga, and without certainty that Congress will pass the USMCA in short order (which is a disgrace), we have been underweighting the transports. Union Pacific (UNP) is our only current holding in the industry.
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If JB Hunt's results allayed fears of a recession, CSX's exacerbated them. Not a full day after trucker JB Hunt (JBHT) gave us a rosy outlook for the second half of the year, along comes rail giant CSX (CSX $58-$71-$81) to splash cold water on that halcyon image. Shares of the $60 billion railroad were falling by double digits on Wednesday after earnings disappointed and management's comments stirred up some serious concerns. While the $3.1 billion in revenues generated during Q2 were in line with the same quarter last year, shipments fell by 4% from last year. Most disconcerting, however, was management's lowering of full-year guidance, and negative comments made about the economic environment. CEO James Foote used adjectives such as "puzzling" when discussing seasonal patterns for the industry. CSX has pulled about 300 locomotives (out of an inventory of 3,900) out of service over the past year. In sympathy, shares of our Union Pacific (UNP) holding were trading lower by about 5%.
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UNP
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Penn member Union Pacific spikes on new COO announcement. (09 Jan 2019) Within the Industrials sector, Union Pacific (UNP $121-$150-$166) is our one railroad position in the Penn Global Leaders Club. There are a number of reasons we like the rail, including CEO Lance Fritz's exemplary leadership. While it is rare for an addition other than a CEO to matter to investors, the announcement of Jim Vena as the company's new chief operating officer was the catalyst for a nearly 10% spike in UNP shares on Tuesday. Vena has forty years of experience with Canadian National Railway (CNI); for rail watchers, that means one thing: he served under the infamous Hunter Harrison. While the draconian leader Harrison is now deceased, UNP investors are hoping that his "precision scheduled railroading" mindset lives on in Vena. (Harrison would watch his tracks in "real time," and was known for calling an engineer personally if a shipment was behind schedule.) UNP's version of this efficiency standard is called Unified Plan 2020, a strategy designed to "increase operating efficiency and reduce network complexity." Between Fritz and Vena, there is little doubt that we own the right railroad moving forward. The rails are very sensitive to the state of the economy, both domestically and globally. Right now, two issues are front and center: a potential global economic slowdown and the odds of the US-Mexico-Canada Trade Agreement passing a hostile House of Representatives. We believe there will be an ugly fight on purely political grounds, but the deal will be ratified. On the global front, we believe the slowdown will be relatively mild. We remain neutral to bullish on the rails.
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A Tale of Two Railcar Makers: The Divergence of Trinity and American Railcar
(02 Nov 2018) What a wonderful, real-life lesson for investors. Two companies in the same industry. In one day, in the midst of market wreckage, one spikes 50% while the arguably-better one loses one-third of its market value in minutes. (See article in The Penn Wealth Report by clicking button to right. Not a member? Join Here) |
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USX
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Trucker US Xpress Enterprises launches "Full Ride" scholarship program for employees, dependents. US Xpress Enterprises (USX $13-$16-$17) has only been a publicly-traded company for about three months, but the trucking firm has launched a new employee benefits program which is earning it high marks on Wall Street and praise from its workforce. Touted as the "first of its kind within the trucking industry," the company's "Full Ride" program will provide scholarships covering 100% of tuition at Ashford University for not only employees, but also their dependents. Under the program, any combination of two family members at any given time can get an online bachelor's or master's degree at the fully accredited Ashford at no cost. When one family member graduates, another can enter the program. The typical annual cost for students at Ashford is the same as the in-state tuition for most universities—around $17,000. With the robust state of the US economy and a 3.9% unemployment rate, the trucking industry is facing a serious shortage of drivers. US Xpress, the fifth largest asset-based carrier in the US by revenue, hopes to attract quality drivers with this new program. The company, which operates a fleet of 6,800 tractors and 16,000 trailers, was founded in 1985 and is based out of Chattanooga, Tennessee. Information on the program and becoming a driver for USX can be found at the company's website.
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CSX
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Full steam ahead for CSX, and another good sign for the US economy. US railroad CSX (CSX $48-$68-$68) rose about 6% and punched through its 52-week high after reporting a big jump in quarterly profits. The Jacksonville-based hauler, which controls 21,000 miles of track—primarily in the eastern United States, ships coal products, chemicals, intermodal containers, and a diverse mix of other products. Net income rose a quite impressive 72% (to $877 million) from the same quarter last year. Revenues rose 6% year-over-year, to $3.1 billion. Higher freight rates on increased demand, along with a cost-cutting initiative, led to the big profit spike. Recall that we gave a lot of grief to CSX in the Road & Rail industry page due to the hiring of the $300 million man, Hunter Harrison. Now that Mr. Harrison has assumed room temperature, we hope that CSX can continue riding the tailwinds of the second quarter.
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JBHT
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Trucker JB Hunt's revenues and profits surged in the second quarter. (17 Jul 2018) Earlier this year, we mentioned that relatively small ($13B) trucking firm JB Hunt (JBHT $89-$121-$132) was one of our two favorite players in the industry. The intermodal carrier just announced earnings for Q2, and they were off the charts. A surge in freight demand, thanks to the strong US economy, led to a 24% spike in Hunt's revenue (to $2.14B) and a remarkable 55% jump in Q2 earnings (to $151.7M) over the same quarter in 2017. With increased demand and tight capacity, integrated shipping companies have been in the driver's seat, as rates per loaded mile have gone up double digits from last year. The other company we liked in the space, by the way, was Werner Trucking (WERN $29-$36-$44).
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WERN
JBHT |
US trucking shortage about to get worse as police enforce ELD rules
(02 Apr 2018) Per industry regulations, over-the-road truckers are barred from driving over 11 hours per day. On Sunday, police across the nation began enforcing those rules, assuring that big rigs traveling US highways are equipped with with DOT-certified electronic logging devices, or ELDs. An improved economy, a driver shortage, and the new enforcement push are all teaming up to drive the cost of shipping via trucks higher. In fact, spot rates for over-the-road shipping are up over 25% from the same time last year. Who will gain and who will lose from the new enforcement? All of the manufacturing companies and retailers who ship across the US will pay more. Smaller and independent trucking companies who put off installing the now-required ELDs must now pay to get in compliance. The winners will be the big trucking companies which adopted this technology years ago. Our favorites? Werner Enterprises (WERN $24-$37-$44) and JB Hunt Transport (JBHT $83-$118-$126). |
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CSX
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CSX's decisions should leave investors wondering about the competence of the board
(24 Jan 2018) Over the course of the past year, we have written quite disparagingly about CSX's (CSX $45-$57-$60) now-deceased CEO, Hunter Harrison. The $300 million extortion Harrison demanded—which CSX subsequently agreed to pay—to become the head of the Jacksonville-based rail, despite his serious health issues, showed a lack of rational decision-making by the board. Now that Harrison is dead (who would have seen that coming?), the CSX board is changing the company's bylaws to require the CEO to get an annual physical. What an absolute joke. As much grief as we gave Harrison, our vitriol should have been aimed at the company who was dumb enough to hire him—CSX. Furthermore, the disruption Harrison caused during his brief tenure at CSX will take years to straighten out. (For the record, we own competitor Union Pacific—UNP—in the Penn Global Leaders Club.) |
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CSX
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CSX Corp's controversial and uber-arrogant new CEO is dead
(18 Dec 2017) Back in March we reported on CSX Corporation's (CSX $36-$53-$58) coup which yanked Canadian Pacific's (CP) arrogant CEO, Hunter Harrison, away from that company and installed him as the new head of CSX—provided, of course, that shareholders approve his $300 million, 4-year pay package. Harrison said he would quit on the spot if his demands weren't met. (He sounds like the rail equivalent of the NFL's Roger Goodell.) Well, there's good news and bad news with respect to Harrison. Yes, he did get the controversial pay package; unfortunately, he won't be able to spend it. The 73-year-old died suddenly this past weekend due to complications from an undisclosed illness. Now, all hell is breaking loose over the decision to push for this ridiculous pay package, as the rail knew of his poor health. CSX was off about 8% (equates to roughly $4 billion of lost value) in pre-market trading. |
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TSLA
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In largest score to date, PepsiCo pre-orders 100 Tesla electric semis
(12 Dec 2017) Trucker JB Hunt (JBHT) was the first one out of the gate, ordering an undisclosed number of Tesla's (TSLA $193-$341-$390) new electric semis. Now, soft drink giant PepsiCo (PEP $101-$117-$119) has just placed the largest known pre-order of the vehicles to date: 100. According to Reuters, Tesla now has orders on hand for at least 285 of the $150,000 behemoths, with food giant Sysco Corp (SYY) and retailer Wal-Mart (WMT) also placing orders. |
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TSLA
JBHT |
Tesla unveils its radical new electric semi truck, and a new roadster as well
(17 Nov 2017) With the unveiling of his much-hyped all-electric semi, Elon Musk is about to shake up the Class 8 truck world. And the Tesla (TSLA $180-$325-$390) vehicle certainly lived up to the hype. The cab of the vehicle is clean and sleek, placing the driver in a seat square in the middle, with a computer monitor on both sides. The cab is roomy enough for the driver to stand up and stretch, and why not—the vehicle will be semi-autonomous to fully-autonomous. The truck's 500-mile range on one charge also exceeded expectations. In an Apple-esque move, Musk had a "just one more thing" moment, introducing a $200,000 roadster that can reach speeds of 250 mph. As for the semi, orders are already rolling in—JB Hunt (JBHT) has announced it has reserved an undisclosed number of the vehicles. |
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Rails
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The Keystone XL and Dakota Access are Back on Track
So what does that mean for the rails which have picked up the slack? It is amazing how the law of unintended consequences so easily sneaks up on many well-educated academics. Take the case of cross country delivery of crude. When climate change activists “forced” Obama to abandon the Keystone XL pipeline (he never really intended to allow it) because of perceived threats to the environment, railroads were standing by to pick up the slack...read the rest of the story, including the one rail stock we own right now, in The Penn Wealth Report by clicking here: Vol. 5, Issue 02. |
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UNP
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(20 Jul 2017) Penn member Union Pacific coasts past estimates.
Penn Global Leaders Club member Union Pacific (UNP $108-$105-$115)) raised its projections for the rest of the year after an earnings report that easily beat expectations. Revenue rose 8.2% from the same quarter last year, to $5.16 billion, while earnings per share rose 17%, to $1.37. There was an 11% jump in freight traffic. CEO Lantz Fritz said that "absolute business volumes should be stronger in the second half than the first half," but that "year over year comparisons would be challenging." Despite the beat, his "year-over-year" comments caused the stock to trade down about 3% at Thursday's open, keeping the stock well within our "buy" range. |
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CSX
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(18 Jul 2017) CSX up 3.5% on strong earnings, stock buyback announcement
Railroad operator CSX (CSX) spiked after hours following an earnings report that surprised to the upside, and the announcement that the company would buy back another $500 million of its shares. The company reported revenues of $2.85 billion for the quarter, up from $2.7 billion in Q2 of 2016. The company saw growth across nearly all markets, but the primary drivers were strength in the coal transport segment. Management also reaffirmed its strong guidance for the remainder of the year. Penn Global Leaders Club member Union Pacific (UNP) reports on Thursday. |
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SNDR
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Road & Rail. Schneider National goes public. Schneider National, a trucking company previously listed as the 109th largest private company in the US, is now available for public consumption. Listed under the ticker SNDR, the Green Bay firm's executives rang the opening bell at the NYSE Thursday, as shares of their company opened for around $19 each. With a fleet of over 11,000 drivers, 44-year veteran Robert Wyatt, who has logged 5 million road-miles without an accident, helped open the exchange. Schneider, which was founded in 1935, had revenues of $4 billion last year. This might be an interesting small-cap investment opportunity—the math works out to a valuation of around $1.7 billion—but we want to see some financials first.
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CSX
CP |
(08 Mar 2017) CSX's new CEO will resign immediately if he doesn't get $300 million. Activist investor group Mantle Ridge successfully installed 72-year-old Hunter Harrison at the helm of CSX (CSX $24-$48-$50) railroad earlier this week. Next, shareholders will vote on whether or not to award Harrison the $300 million, four-year pay package he has demanded. If voted down, Harrison says he will resign on the spot. Forget what he did at Canadian Pacific (CP $120-$150-$157), this guy sounds like a charlatan to us. We are not touching CSX right now. This is also an example of why we believe the efficient market hypothesis (EMH) is bunk: CSX grew $8 billion in market cap after it became clear that Harrison would become the CEO. Also, we don't like the name Hunter.
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First Buffett took out Burlington Northern, Now Ackman Wants Norfolk Southern
(09 Nov 15) Burlington Northern, old symbol BNI, was once one of our favorite stocks to trade. Then “railroad buff” Warren Buffett felt the need to take them out (at least for the rest of us) and put that fine American rail company on his personal Monopoly board. He liked to play with trains as a kid, he admitted. At least we could still trade Norfolk SouthernNSC, right? Not if Canada’s second-biggest railroad, Canadian PacificCP, gets its way.
On Monday it came to light that Calgary-based CP was exploring its takeover options of the American giant. While the companies are relative peers in terms of size, the US government’s convoluted and wrongheaded corporate tax system gives CP the leg up on any possible merger. CP has already begun the process of raising the funds necessary for the $24 billion (give or take) deal.
Canadian Pacific has dreamed of becoming a transcontinental rail company for years, and the carrier is coming off of a failed attempt to merge with Jacksonville-based CSX Corp. Each of these railroads—the two American and the one Canadian—has a respective market cap of roughly $25 billion.
Perhaps we should not be surprised to see the name of one of our most vilified hedge fund managers in the middle of this takeover attempt. You guessed it, none other than Pershing Square’s Bill Ackman has his squalid fingerprints all over the scene.
A few years back, Ackman began accumulating a double-digit percentage of CP stock, spending in excess of $1 billion of his firm’s money. He began his typical scorched-earth policy against the railroad’s then-current management, ultimately getting his own man—railroad veteran Harrison Hunter—installed as CEO. As was his modus operandi with Valeant’s Michael Pearson and the duo’s quest to engineer value by taking over strong American companies, Hunter and Ackman began salivating over an American railway.
They first set their sights on CSX, but the merger talks were quashed by a leery CEO who wanted nothing to do with Ackman or his minion. Now, one year later, CP is zeroing in on Norfolk. The deal should face enormous regulatory hurdles in the US, but based on Ackman’s political donations, the skids may already be greased. (Reprinted from this coming Sunday’s Journal of Wealth & Success, Vol. 3, Issue 44.)
(OK, got it. Take me back to the Penn Wealth Hub!)
(09 Nov 15) Burlington Northern, old symbol BNI, was once one of our favorite stocks to trade. Then “railroad buff” Warren Buffett felt the need to take them out (at least for the rest of us) and put that fine American rail company on his personal Monopoly board. He liked to play with trains as a kid, he admitted. At least we could still trade Norfolk SouthernNSC, right? Not if Canada’s second-biggest railroad, Canadian PacificCP, gets its way.
On Monday it came to light that Calgary-based CP was exploring its takeover options of the American giant. While the companies are relative peers in terms of size, the US government’s convoluted and wrongheaded corporate tax system gives CP the leg up on any possible merger. CP has already begun the process of raising the funds necessary for the $24 billion (give or take) deal.
Canadian Pacific has dreamed of becoming a transcontinental rail company for years, and the carrier is coming off of a failed attempt to merge with Jacksonville-based CSX Corp. Each of these railroads—the two American and the one Canadian—has a respective market cap of roughly $25 billion.
Perhaps we should not be surprised to see the name of one of our most vilified hedge fund managers in the middle of this takeover attempt. You guessed it, none other than Pershing Square’s Bill Ackman has his squalid fingerprints all over the scene.
A few years back, Ackman began accumulating a double-digit percentage of CP stock, spending in excess of $1 billion of his firm’s money. He began his typical scorched-earth policy against the railroad’s then-current management, ultimately getting his own man—railroad veteran Harrison Hunter—installed as CEO. As was his modus operandi with Valeant’s Michael Pearson and the duo’s quest to engineer value by taking over strong American companies, Hunter and Ackman began salivating over an American railway.
They first set their sights on CSX, but the merger talks were quashed by a leery CEO who wanted nothing to do with Ackman or his minion. Now, one year later, CP is zeroing in on Norfolk. The deal should face enormous regulatory hurdles in the US, but based on Ackman’s political donations, the skids may already be greased. (Reprinted from this coming Sunday’s Journal of Wealth & Success, Vol. 3, Issue 44.)
(OK, got it. Take me back to the Penn Wealth Hub!)