NEW YORK • Canadian Pacific Railway Ltd., the second-biggest railroad in Canada, is exploring a takeover of U.S. carrier Norfolk Southern Corp. in a fresh attempt to consolidate the North American industry, according to people familiar with the matter.
Canadian Pacific is raising financing and has held early-stage merger talks with Norfolk Southern, which is valued at about $24 billion, said two of the people, who asked not to be identified because deliberations are private. Discussions are preliminary and talks may not progress or lead to a deal, they said.
Shares in Norfolk Southern rose as much as 13 percent in New York after trading was temporarily halted, the biggest intraday gain since 2001. Canadian Pacific increased as much as 7.2 percent in Toronto. The Standard and Poor's 500 Railroads Index, which tracks four carriers, erased earlier losses and rose almost 5 percent.
Representatives for Canadian Pacific and Norfolk declined to comment.
A move for Norfolk Southern, the second-biggest railroad in the eastern U.S., would revive Canadian Pacific's effort to build a transcontinental carrier after talks with CSX Corp. failed last year. In floating the idea of a CSX tie-up, Canadian Pacific Chief Executive Officer Hunter Harrison upended the long-held view in the industry that it was fruitless to even discuss another merger because regulators would object.
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Dealmaking since U.S. railroad deregulation in 1980 has shrunk the number of major U.S. carriers to four alongside Canadian Pacific and Canadian National Railway Co. But Harrison, 71, is a veteran of past rail mergers, and he has led an operational turnaround at Canadian Pacific since being lured out retirement in 2012 by activist investor Bill Ackman, whose Pershing Square Capital Management is the biggest shareholder.
Canadian Pacific fell 20 percent this year through Friday, valuing the Calgary-based company at about C$27 billion ($20 billion). Norfolk, Va.-based Norfolk Southern declined 27 percent in that span.