Benzinga | Jun 8, 2021 04:17PM EDT

Canadian Pacific Railway Issues Response To Surface Transportation Board's Schedule Calling For Comments By Jun. 28 On Co.'s Voting For Deal With Kansas City Southern: Says CN Voting Trust Not In Public Interest

CN voting trust is not in the public interest; its approval would pre-judge STB review, harm competition, risk CN shifting financial burdens to shippers, and pave the way for additional U.S. rail consolidation

The next 20 days will determine the course of competition for U.S. railroading and North American commerce for the next 150 years

CALGARY, AB, June 8, 2021 /PRNewswire/ - Canadian Pacific Railway Limited (TSX:CP) (NYSE:CP) ("CP") today issued the following statement in response to the Surface Transportation Board's ("STB") schedule calling for comments by June 28 on Canadian National's ("CN") use of a voting trust in connection with its proposed combination with Kansas City Southern ("KCS"):

CP looks forward to the STB's review of CN's proposed voting trust under the 2001 merger rules. As noted previously by the STB, voting trusts are a "privilege, not a right" and "should not be used routinely, but rather should be available only for those rare occasions when their use would be beneficial." Accordingly, before CN is allowed to use a voting trust, the STB must decide that "the proposed use of a voting trust in a potential CN-KCS transaction is 'consistent with the public interest'" based on consideration of "both the potential benefits and costs of such use."

No later than June 28, as spelled out in today's schedule, CP plans to file comments explaining why the public interest costs of CN's proposed voting trust outweigh the non-existent benefits. We look forward to fully participating in this public interest review along with other concerned stakeholders from across the transportation supply chain. More than 130 shippers, communities, labor organizations, and other stakeholders have already communicated opposition to CN's voting trust proposal directly to the STB. The next 20 days, and the STB's subsequent deliberations, will determine the course of competition for U.S. railroading and North American commerce for the next 150 years.

CP remains confident that the STB will ultimately reject CN's proposal to use a voting trust. Allowing CN to close into trust would not be in the public interest because its approval would pre-judge STB review, harm competition, risk CN shifting financial burdens to shippers, and pave the way for additional U.S. rail consolidation. CN's arguments in favor of a trust amount to the claim that CN and KCS should be able to decide what is in the public interest based on which railroad is offering more money to acquire KCS -- that argument elevates private interests over the public interest.

The Department of Justice ("DOJ") raised serious competitive concerns about CN's proposed voting trust on May 14, contending that "the Board should not permit the proposed CN voting trust because CN's proposed acquisition of KCS appears to pose greater risks to competition than the risks posed by a CP-KCS merger." The DOJ further stated that "threats to competition would be present immediately after the CN voting trust is consummated." These threats cannot be overcome by the divestiture CN has proposed because that divestiture would be both too narrow and too late -- coming only after the voting trust period would have ended.

Because CN's agreement with KCS may not be capable of consummation, CP is proceeding with preparing our full merger application seeking authority from the STB to acquire control of KCS. The STB has already approved CP's use of a voting trust and affirmed the application of the pre-2001 merger rules because a CP-KCS combination is truly end-to-end and pro-competitive.

CP maintains that a CP-KCS combination is the only viable Class 1 merger that serves the best interests of customers and stakeholders, but also the continent's rail network to enable a new corridor of investment and capacity for the North American economy to grow.