A possible merger plan between Canadian Pacific Railway Ltd. and Norfolk Southern Corp. has received backing from billionaire investor Bill Ackman, however, Ackman has a new unlikely opponent.

However sources at the U.S. Army claim that it could potentially harm national defense. The Army told the Surface Transportation Board that it did not agree with Canadian Pacific’s plan to make Chief Executive Officer Hunter Harrison leave his post in order to become head of Norfolk Southern, according to Bloomberg. It seems like Ackman has made a new, powerful enemy.

U.S. Army Opposes Ackman Merger Plan

 

Proposed merger runs into opposition

The move would be part of a voting trust structure put in place before the merger was approved by the regulator. Canadian Pacific has asked the board to make a ruling on the voting-trust plan by May 6.

“We are troubled by the possibility that Mr. Harrison could become a senior executive at Norfolk Southern in advance of the board ruling in favor of common control/merger between Canadian Pacific and Norfolk Southern,” according to a letter from the Army. “If Mr. Harrison is a senior executive at NSR he may be placed in a position where he must make business decisions with potentially competing interests.”

Canadian Pacific plans to acquire Norfolk Southern, the second-largest eastern U.S. railroad, in order to make a railroad that runs from coast-to-coast. The company says it would reduce costs and congestion and bring major benefits for shippers.

However Norfolk Southern has rejected three offers as “grossly inadequate.” The latest offer, made in December, valued the company at $27 billion. Norfolk Southern also expressed its concerns that regulators could reject the deal.

Investor Ackman still pushing for a deal

Ackman, whose Pershing Square Capital Management owns a 9.1% stake in Canadian Pacific, has pushed for a merger. Ackman’s Pershing is the second-largest shareholder in the company.

Tge Army letter was signed by David Dorfman, a senior civil engineer for the Railroads for National Defense Program. It says that 36,000 miles of rail lines are designed to move cargo “in peace and war.”

“It is too early to determine whether either a CPRL+NSR merger itself, or a downstream merger involving other major railroads, would degrade national defense,” the letter said. “However, the potential certainly exists for either the CPRL+NSR merger or a downstream merger to adversely affect national defense.”

Other parties including U.S. House Transportation Committee Chairman Bill Shuster, United Parcel Service Inc. and FedEx Corp. have also expressed concerns about a potential deal. However dozens of shippers have supported the plans.

It has been a tough year for Bill.