Canadian Pacific (CP) has filed a formal objection with the Surface Transportation Board (STB) stating that Canadian National (CN) doesn’t qualify for a waiver of the STB’s rules for major transactions regarding its proposal for Kansas City Southern (KCS).
In its letter, CP claims that the CN/KCS transaction doesn’t satisfy any of the criteria that the STB relied upon in finding that the waiver should apply, which it granted on 23 April 2021. The move follows the news that CN made a bid for KCS, upending CP’s intended merger with the company.
The submission outlines six reasons why CP believes the waiver should be rejected.
- A combined CN/KCS would greatly expand the size of the fifth largest US Class 1 railroad, vastly increasing the gap between CN/KCS and the new smallest Class 1, CP.
- The CN/KCS transaction fails the “end-to-end” test, despite CN’s assertions to the contrary.
- A CP/KCS deal preserves the basic six-carrier structure of the North American rail network, whereas the CN/KCS transaction would destabilise it.
- The premium price CN is offering for KCS will not only extinguish the competition that a CP/KCS merger would bring, but also require CN to find ways to recoup those extra costs.
- CN’s proposal to acquire KCS would overturn all the competitive benefits of a CP/KCS merger.
- CN has already committed itself to the new merger regulations, despite claims the adherence was voluntary, so the STB should proceed in line with the 2001 rules for major mergers.
A copy of CP’s full filing is available here.
