Canadian Pacific Railway gives in, seeks ruling on Norfolk Southern deal from U.S. oversight board

After months of wrangling, Canadian Pacific Railway Ltd. has reluctantly decided to ask U.S. regulators to weigh in around the first step of its planned takeover of Norfolk Southern Corp.

CP’s takeover offer, which NS has repeatedly rejected, proposes putting the Canadian railroad right into a voting trust so that its veteran CEO may take the helm of NS before the merger even closes.

This would theoretically allow the companies to merge financially and keep their management separate until regulators rule around the proposed merger.

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NS has asked CP to find a declaratory order from the U.S. Surface Transportation Board (STB) whether such a structure is likely to receive regulatory approval – a request CP ignored until Tuesday.

“While we remain fully positive about our comprehensive regulatory plan, shareholders of both CP and NS have recommended that we seek this declaratory order as a means to higher understand the STB’s thoughts about the proposed voting trust model in front of any formal application,” CP leader Hunter Harrison said in a statement.

“We still think this course of action is unnecessary, however, we believe hearing the shareholders – owners in our respective companies – is important.”

NS issued a short reaction to the decision, saying CP has “acknowledged that there is a road to determine the validity of its proposed voting trust structure by seeking a declaratory order from the STB.”

RBC analyst Walter Spracklin said there’s a “good chance” the STB will refuse the request an initial review and insist that CP feel the normal regulatory channels instead.