(The following story by Gregory Richards appeared on the Virginian-Pilot website on May 18.)
NORFOLK, Va. — Shares of Norfolk Southern Corp. traded to a new 52-week high Thursday on speculation that railroads may be buyout targets.
The Norfolk-based railroad’s stock rose $1.53 – or 2.7 percent – to close at $58.32 a share in trading that was more than twice its average daily volume over the past six months, according to Bloomberg News. The shares hit an annual high of $58.81 earlier Thursday.
The market surge reflects buyout speculation in the rail industry, talk that included Norfolk Southern, Michael Malone, a trading analyst at Cowen & Co. in New York, told Bloomberg.
“There does appear to be some speculation in the marketplace” about a leveraged buyout at Norfolk Southern, Malone said. “That’s fueled in part by recent interest in the rails generally, and the recent bid for Florida East Coast Industries specifically.”
Florida East Coast Industries Inc., a publicly held St. Augustine, Fla.-based company that operates a railroad serving Florida, announced last week that it was being acquired by private equity funds managed by Fortress Investment Group LLC for about $3.5 billion.
Norfolk Southern spokesman Robert C. Fort said Thursday that he wouldn’t comment on talk of a Norfolk Southern buyout. “We don’t comment on rumors,” he said.
Wick Moorman, the railroad’s chairman and chief executive, said recently that the private equity leveraged buyout model wouldn’t be suited for railroads, according to a Dow Jones’ MarketWatch report.
Leveraged buyouts involve taking a company private by using a large amount of debt.
Norfolk Southern’s previous 52-week trading high was set Wednesday, after legendary investor Warren Buffett disclosed ownership of 6.4 million shares of the railroad, valued at about $322 million as of March 31. The stock ended Wednesday at $56.79, up 92 cents or 1.7 percent.
Separately, Norfolk Southern, the nation’s fourth largest railroad, said Thursday that it will hold an “investor day” June 6 in New York for active sell-side analysts and its biggest shareholders. It said it will use the day-long event to overview its business, including growth opportunities and economic trends.
Spokeswoman Susan Terpay said such events are held occasionally, with the last occurring about five years ago.
The gathering will be broadcast over the Internet on a yet-to-be announced Web site.