william ackmans north american rail merger is a tough sell dealbookcontortions make rail deal a tough sell for william ackman cyran and kevin allisondec 8 2015creditdavid a grogancnbc via getty imageswilliam a ackmans convoluted north american rail merger is a tough sellcanadian pacific revised its offer for the american railway operator norfolk southern on tuesday to include an interim trust structure and some fingerintheair calculations about possible future valuations mr ackman the billionaire hedge fund manager who is canadian pacifics biggest shareholder and a director contributed 23 pages of slides and joined a conference call with analystscanadian pacific which operates railways along the united statescanada border offered shareholders in east coastfocused norfolk southern worth 27 billion at mondays closing share price less cash but sooner in its new proposal as well as a heftier 47 percent share in the combined company closing earlier would involve a voting trust intended to allow combined ownership but separate operation of the two railroads while the united states regulator the surface transportation board considers the full mergernorfolk southern rebuffed canadian pacific once again even before mr ackman had finished his presentation its curious that the target wont even negotiate because the record of canadian pacifics chief executive e hunter harrison in creating operating efficiencies at three different railroad companies is strong and under the proposal thats on the table he would move over to run norfolk southern as soon as the interim trust merger was set potentially by mid2016one of the objections of norfolk southerns chief executive james a squires objections is that even the votingtrust structure never mind the merger itself is unlikely to be approved by the regulator there are precedents but part of mr squiress reasoning is that the regulators criteria have become tighter including the need to meet an untested publicinterest standardmaking the argument that combined ownership and mr harrisons planned job switch would still leave the two railroads notionally independent certainly requires mental acrobatics but canadian pacific does have a case that norfolk southern has room to improve efficiency mr harrison reckons he could save 13 billion annually a decent value uplift in itself mr ackmans broader argument posits a greatly enhanced market valuation a couple of years henceyet canadian pacifics contortions to craft a deal suggest that approval by rail regulators wont come easy shareholders may also discount the prognostications made by mr harrison and mr ackman both companies shares were down on news of the revised offer and rejection maybe investors are just confused too