The STB decision
In rejecting the proposed CN-KCS voting trust, the STB recognized the trust was not consistent with the public interest
and the CN-KCS combination is anticompetitive.
In its decision the STB wrote,
the Board finds that
(CN and KCS) have not demonstrated that their use of a voting trust would be consistent with the public interest. Applicants have shown no benefit from the use of a voting trust to stakeholders other than KCS and CN. At the same time, the use of a
voting trust, in the context of the impending control application, would raise risks that threaten to undermine the public interests.
Noting the
competitive overlap the CN-KCS merger brings with it, the STB said the competitive overlap in (CN and KCSs) networks is not limited to, and extends beyond, the Baton
Rouge-New Orleans corridor. Applicants operate parallel lines through the central portion of the United States and compete for north-south traffic on these lines, particularly where KCSs network
parallels the section of CNs network that CN acquired from Illinois Central (IC) in 1999.
The decision notes how any CN-KCS combination would have to be reviewed under the new regulations established in 2001, the first proposed merger to fall under those rules. The new regulations that apply to major transactions such as
this one go beyond preserving competitive options at two-to-one locations and seek to protect product and geographic competition.
In comparing the CN-KCS combination with the proposed CP-KCS transaction, the
STB said the two transactions are substantially different: the proposed CP-KCS transaction
is an end-to-end merger,
whereas, here, the CN system overlaps with that of KCS.
Conference Call for Investment Community
CP will host an investor conference call on Sept. 1, 2021, at 9 AM Eastern Time to discuss the STB decision. A live webcast of the call and the replay will be
available on the CP website at investor.cpr.ca. To pre-register for the conference call, click here and to listen to the live conference call, dial (844) 200 6205 in the U.S. or (929) 526 1599
internationally.
A conference call replay will be available until Tuesday, September 7. To access the replay, dial (866) 813 9403 and reference the
passcode 870499.
CP-KCS: The only viable Class 1 combination
While the CN-KCS merger proposal fails the public interest and competition tests, a
CP-KCS combination would create more competition not less in the freight rail industry and would be better for Amtrak. It brings more competition among railways and protects obligations to
passenger service.
A CP-KCS combination offers all the same benefits and more to rail shippers and
the supply chain with none of CN-KCS harms or need to enforce promises through regulation. A CP-KCS combination:
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Creates single-line routes to all the markets that a CN-KCS network would
reach
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