{"id":791,"date":"2016-02-18T09:03:37","date_gmt":"2016-02-18T14:03:37","guid":{"rendered":"https:\/\/www2.law.temple.edu\/10q\/?p=791"},"modified":"2016-02-18T09:03:37","modified_gmt":"2016-02-18T14:03:37","slug":"latest-on-united-and-proposed-railway-merger","status":"publish","type":"post","link":"https:\/\/law.temple.edu\/10q\/latest-on-united-and-proposed-railway-merger\/","title":{"rendered":"UPDATE: Latest on United Airlines and the Proposed Canadian Pacific-Norfolk Southern Merger"},"content":{"rendered":"

Over the past several months, we\u2019ve brought you some excellent pieces by Conrail GC Jonathan Broder (LAW \u201983), <\/em>Flying Off the Rails<\/em><\/a> and <\/em>Unwanted Suitors<\/em><\/a>, about scandal at United Airlines and the proposed Canadian Pacific-Norfolk Southern merger, respectively. Ever alert to developments, Broder (who\u2019s since become an editor of the 10-Q) provides updates to both stories: <\/em><\/p>\n

Flying off the Rails:<\/a><\/p>\n

After beginning his tenure at United, Oscar Munoz tragically suffered a massive heart attack in late 2015. In early 2016, he received a heart transplant and will not be back at the helm of the airline until the second quarter. This is a reminder that a reflexive, quick reaction by a company is not always the best course. Clearly, Mr. Munoz\u2019s health was not fully vetted when he was parachuted in from CSX.<\/p>\n

This brings to mind an eerily similar situation that occurred at Conrail in the late 1980\u2019s. When the legendary CEO, L. Stanley Crane was forced into an early retirement, his hand-picked successor from rival CSX, Dick Sanborn suffered a fatal heart attack one month after taking the job. Conrail then took its time and did a full vetting (health and otherwise) before bringing Jim Hagen in to lead the company.<\/p>\n

CEO health is a critical risk management issue for any company, particularly a publically-traded company that is in a difficult situation.<\/p>\n

Unwanted Suitors<\/a><\/p>\n

In the most recent installment of the Canadian Pacific-Norfolk Southern takeover saga, NS has been very successful in rounding up both political and customer opposition to the proposed merger. In response, CP is reassessing its options. One rumored possibility was a proxy battle to replace NS\u2019 board of directors with a board more friendly to E. Hunter Harrison of CP.<\/p>\n

One alternative to a straight merger is having Mr. Harrison become CEO of NS and attempt to \u201cwork his magic\u201d again with this struggling railroad. The date for a proxy alternative is February 15, but CP has announced that it is no longer pursuing a proxy fight. Instead, it will ask NS shareholders adopt a resolution to require NS management to negotiate in good faith with CP regarding a possible merger. One thing to watch is that about 70% of NS\u2019 stock is owned by institutional investors such as Vanguard.\u00a0\u00a0 It remains to be seen who made the best pitch. In the meantime, the lawyers and regulators lurk.<\/p>\n","protected":false},"excerpt":{"rendered":"

Over the past several months, we\u2019ve brought you some excellent pieces by Conrail GC Jonathan Broder (LAW \u201983), Flying Off the Rails and Unwanted Suitors, about scandal at United Airlines and the proposed Canadian Pacific-Norfolk Southern merger, respectively. 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