Rail stocks up on Canadian Pacific bid report
Wed Jul 18, 2007 11:02 AM EDT162
CHICAGO (Reuters) - North American railroad stocks rose on Wednesday following a report that a private equity consortium plans to bid for Canadian Pacific Railway Ltd.
(CP.TO: Quote)
The Globe and Mail newspaper reported that a consortium led by Brookfield Asset Management Inc. (BAMa.TO: Quote) (BAM.N: Quote) was originally rebuffed by the railroad but is seeking another meeting with management.
The article also noted that as a possible defense Canadian Pacific might seek to sell itself to No. 1 U.S. railroad Union Pacific Corp. (UNP.N: Quote) instead.
Analysts reacted coolly to the report, saying that U.S. or Canadian regulators would look hard at any possible railroad buyout or merger.
"Look for the rails to trade up strongly on this news," Bear Stearns analyst Edward Wolfe wrote in a research note, "despite our caution that the rails are not interested in going private, returns are decent but not exciting at current valuations and the regulatory road will be long and challenging."
Wolfe pointed out that in 2000 the U.S. Surface Transportation Board rejected a proposed merger between Burlington Northern Santa Fe (BNI.N: Quote) and Canadian National Railway (CNR.TO: Quote), so a possible sale of Canadian Pacific to Union Pacific "seems an uphill battle."
The railroads have performed well in the past few years, buoyed by a combination of increased demand for coal and imports plus improved management.
In trade on the New York Stock Exchange shares in Burlington Northern Santa Fe Corp. were up 1.8 percent, or $1.65, at 92.25, Norfolk Southern Corp. (NSC.N: Quote) rose 3.1 percent, or $1.77, at $58.39, Union Pacific stock was up 1.7 percent, or $2.01, at $125.91 and CSX Corp (CSX.N: Quote) rose 2.7 percent, or $1.33, at $49.85.
Regional U.S. railroad Kansas City Southern (KSU.N: Quote) was up 2.4 percent, or 97 cents, at $41.42, while short-line holding company Genesee & Wyoming Inc. (GWR.N: Quote) rose 1.1 percent, or 32 cents, to $30.92.
Canadian Pacific shares were halted. Shares in Canada's other major railroad, Canadian National, were up more than 5 percent, or C$2.95, at C$60.25.
Data as of 18 Jul 2007 11:42 AM EDT
Symb Company Last Chg Chg %
CP.TO Canadian Pacific Railway Ltd 77.05 -1.24 -1.58
BAMa.TO Brookfield Asset Management Inc 41.6 +0.05 +0.12
BAM.N Brookfield Asset Management Inc $39.79 +0.01 +0.03
UNP.N Union Pacific Corp $127.64 +3.74 +3.02
BNI.N Burlington Northern Santa Fe Corp $92.65 +2.05 +2.26
CNR.TO Canadian National Railway Company 59.75 +2.45 +4.28
NSC.N Norfolk Southern Corp $58.46 +1.84 +3.25
CSX.N CSX Corp $50.13 +1.61 +3.32
KSU.N Kansas City Southern $41.39 +0.94 +2.32
GWR.N Genesee & Wyoming Inc $30.98 +0.38 +1.24
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