(Bloomberg News circulated the following story by Angela Greiling Keane on July 19.)
NEW YORK — Canadian Pacific Railway Ltd., the country’s second-largest railroad, said it rebuffed a “highly conditional” takeover approach from Brookfield Asset Management Inc. this year. The shares jumped 16 percent, the most ever.
The offer was “inadequate,” and the carrier isn’t in buyout talks with anyone, Canadian Pacific said today in a statement confirming the interest from Toronto-based Brookfield, North America’s biggest publicly traded property manager.
“We believe the likelihood of a transaction is quite small” after today’s surge in the stock, Citigroup Global Markets analyst John Kartsonas in New York wrote in a note.
The Brookfield overture made Canadian Pacific the latest railroad to attract investors seeking to buy a stake or the entire carrier. Burlington Northern Santa Fe Corp.’s largest shareholder is now billionaire Warren Buffett, while Florida East Coast Industries Inc., a railroad-and-real estate company, is being acquired by buyout firm Fortress Investment Group LLC.
Brookfield spokesman Denis Couture declined to comment.
Shares of Canadian Pacific climbed C$11.95 to C$89 at 4:18 p.m. in Toronto for the biggest gain since the company went public in 2001. While keeping his “hold” rating, Kartsonas advised investors to sell.
Trading halted before the Toronto Stock Exchange opened today after the Globe and Mail newspaper in Toronto reported Brookfield was leading a group preparing a takeover offer. The shares resumed trading at noon after Canadian Pacific issued its statement, citing a request from Market Regulation Services Inc. on behalf of the Toronto exchange.
Newspaper Report
The Canadian Pacific approach came in April and involved a group including Brookfield, Goldman, Sachs & Co. and the Caisse de Depot et Placement du Quebec, Canada’s biggest pension-fund manager, according to the Globe and Mail, citing people familiar with the matter.
Buying Canadian Pacific would add to Brookfield’s infrastructure business. The company has been making purchases such as power plants and transmission lines in North and South America. Brookfield manages about $70 billion in assets.
Goldman Sachs spokesman Michael DuVally and Caisse spokesman Gilles des Roberts declined to comment.
Canadian Pacific, the world’s largest shipper of solid sulfur, posted first-quarter net income of C$129 million ($115 million), an 18 percent increase due to increased shipments of sulfur and fertilizer. It is scheduled to report second-quarter earnings on July 24.
Brookfield receives the biggest portion of earnings from property leasing and holds 50 percent of Brookfield Properties Corp., owner of Manhattan’s World Financial Center.
Brookfield’s Bids
The company pursued a dozen acquisitions in the past year, including hydroelectric plants in Brazil and the U.S., and Australian construction company Multiplex Group. In January, it offered $1.35 billion for U.S.-based shopping-mall owner Mills Corp. before being outbid.
As of Dec. 31, Montreal-based Caisse managed net assets of about C$144 billion. The fund manager is part of a buyout group that agreed last week to acquire Legacy Hotels Real Estate Investment Trust, the Canadian owner of Quebec City’s Fairmont Le Chateau Frontenac, for C$1.46 billion.
North American railroads are stirring investor interest because rising oil prices make them more competitive with trucks. Even before today, shares of Canadian Pacific added 25 percent this year.
Shares of Canadian National Railway Co., the country’s biggest carrier, rose C$3.35, or 5.9 percent, to C$60.65 today. They were up 14 percent for the year through yesterday.