CORRECTED-UPDATE 1-CP Rail touts $1.8 bln savings from Norfolk deal

(Corrects paragraph 4 to say Norfolk all but rejected the
offer, not rejected the offer)
Nov 18 (Reuters) - Canadian Pacific Railway Ltd CP.TO said
its proposed $28.4 billion acquisition of U.S. railroad operator
Norfolk Southern Corp (N:NSC) NSC.N would help the combined company to
save at least $1.8 billion annually.
Canadian Pacific's shares rose 5.5 percent to C$194.96 in
morning trading on Wednesday in Toronto. Norfolk shares were up
about 6 percent at $92.15 in New York.
The combined company will also have substantial tax
benefits, Canadian Pacific said in a letter it sent to Norfolk
on Tuesday. urn:newsml:reuters.com:*:nCNWh90yka
Canadian Pacific made the letter public on Wednesday after
Norfolk all but rejected the offer, calling it "low-premium" and
warning of significant regulatory hurdles.
The takeover proposal "may be the first step on a journey
that could see the Canadian carrier eventually going directly to
Norfolk's shareholders before facing a long and drawn out
regulatory process," Cowen and Co said in a note on Wednesday.
The brokerage added that a rejection by Norfolk's board is
likely "a foregone conclusion," and that this could lead
Canadian Pacific to sweeten the offer a bit.
Deutsche Bank (DE:DBKGn) analysts said the deal could test stricter
U.S. merger rules governing the rail sector. The new rules were
implemented following Canadian National Railway Co's CNR.TO
failed bid to buy Warren Buffett-owned Burlington Northern Santa
Fe 15 years ago.
Deutsche Bank raised its price target on Norfolk's shares to
$93 from $84.
Canadian Pacific also said in the letter it had secured
financing commitment of $14.2 billion from JP Morgan Securities.
Shares of North American railroad operators rose on the
merger proposal. Union Pacific Corp (N:UNP) UNP.N was up about 2
percent, while Canadian National Railway CNR.TO gained about 3
percent.

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BREAKINGVIEWS-Rail deal needs more than $28 bln to stay on track
- RTRS urn:newsml:reuters.com:*:nL1N13D14D
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