CP sent a letter to NS on November 17 proposing a merger between the two companies to create a "transcontinental railroad," but the following day NS dismissed CP's offer, which equated to $US 46.72 and 0.348 CP shares for every NS share it owns as "low-premium."

Following a comprehensive review of the proposal, NS chairman, president and CEO Mr Jim Squires informed CP CEO Mr E. Hunter Harrison and chairman Mr Andrew Reardon in a letter that the company's bid "substantially undervalues" NS.

"We believe in our ability to generate greater shareholder value through execution of our strategy – delivering efficient and superior service to build a more profitable franchise based on price and volume growth, implementing efficiency measures, and increasing returns on capital to strengthen our financial performance, all while maintaining our disciplined capital return strategy," Squires said in a statement on December 4.

NS expects to achieve an operating ratio of less than 70 in 2016 with additional improvements over the next five years forecasting a further reduction to 65 by 2020. "By maximizing our asset utilisation, we believe we can achieve double-digit compounded EPS growth over this period, Squires says. "In short, Norfolk Southern is well positioned to deliver compelling value to our shareholders."

The board of NS accuses CP of opportunism, timing its bid to exploit a market valuation of NS that has been negatively impacted by low commodity prices and does not reflect recent investment in infrastructure or anticipated gains from revenue growth initiatives currently being implemented by the company.

Squires also argues that the voting trust structure proposed by CP is likely to be rejected by the Surface Transportation Board (STB) and there is no certainty any other voting structure would be approved.

"We believe that CP's short-term, cut-to-the-bone strategy could cause NS to lose substantial revenues from our service-sensitive customer base," Squires says. "We also believe the proposed transaction risks harm to vital transportation infrastructure and the communities we serve. Any strategy that hurts our customers and the broader community is highly unlikely to receive regulatory approval and is inconsistent with the delivery of shareholder value over the long-term."

Last year CP held merger talks with another US Class 1 railway, CSX Corporation, but these discussions were subsequently abandoned.