Norfolk Virginia USA - Norfolk Southern Corp. (NS) urged employees to vote down Canadian Pacific Railway Ltd.'s (CP) effort to enlist shareholders to press the board for friendly merger talks at its annual meeting, which it scheduled for 12 May 2016.
 
In a letter to employees the company made public in a securities filing Tuesday, NS Chief Executive Jim Squires said that the company is making good progress on its restructuring plans and that employees should vote no on merger talks.
 
Separately, in the company's proxy filed late Monday, the railroad's board said it would be willing to start merger discussions if CP "indicates a willingness to meaningfully increase the value represented by its proposal," and if the U.S. Surface Transportation Board were to indicate that it would be willing to approve an interim trust structure that would operate during a lengthy regulatory review.
 
CP has sought an order from the board declaring that the proposed structure is valid.
 
A CP spokesman said that it has been flexible on price, and that any negotiations about the value of its bid need to be in good faith and face-to-face.
 
CP "remains open to working with NS to successfully structure a transaction that will better serve customers, enhance competition, and create far more shareholder value than NS's strategic plan," the spokesman added.
 
NS's proxy says that CP has informed NS that it will be filing its own shareholder proposal to urge the two railroads to enter merger talks.
 
In the proxy, NS's board recommends that shareholders vote against that CP proposal.
 
NS includes an item on its proxy voting card for shareholders to vote on the measure.
 
CP will be sending separate voting cards to NS shareholders.
 
"Every vote is important," Mr. Squires wrote in his letter to employees, urging them to vote promptly.
 
CP, backed by shareholder activist William Ackman, has been seeking to create a transnational U.S. railway since 2014 when it made an unsuccessful overture to CSX Corporation.
 
Mr. Ackman has promised investors at NS that CP's veteran CEO, Hunter Harrison, can repeat his turnaround success in Canada by eliminating expensive bottlenecks in the fragmented U.S. rail network.
 
NS has disappointed shareholders for years with one of the worst operating performances in the industry.
 
CP first launched its roughly $30 billion takeover bid for NS in November, but was rebuffed.
 
After threatening a potential proxy fight, executives decided to strike a friendlier tone, calling for shareholders to vote yes for merger talks.
 
NS's board said in the proxy filing that it reviewed each of CP's proposals, and determined they were "grossly inadequate, substantially undervalued Norfolk Southern, and would face substantial regulatory risks and uncertainties that would be highly unlikely to be overcome."
 
Laura Stevens.