Canadian National makes final pitch for $33.6B railroad deal

Canadian National has made its final pitch to regulators for preliminary approval of the $33.6 billion acquisition of the Kansas City Southern Railroad

OMAHA, Neb. — Canadian National has made its final pitch to regulators for preliminary approval of its $33.6 billion acquisition of the Kansas City Southern Railroad.

Canadian Railroad reiterated its main arguments for the deal in a detailed filing with the Surface Transportation Board on Tuesday. Earlier this spring, regulators indicated they would take a cautious approach to approving Canadian National’s plan to set up a voting trust that would acquire Kansas City Southern and during STB’s lengthy review of the overall deal. Will catch the railroad.

More than 2,000 letters were filed with regulators, most of whom supported the deal, but it also attracted strong opposition from rival Canadian Pacific Railroad and several hundred commentators who spoke about the competition hurting the merger. expressed concern. Canadian Pacific lost its chance to acquire Kansas City Southern when it refused to raise its original $25 billion bid for the smaller US railroad, but CP continues to seek STB approval for its combination with Kansas City Southern. So it will be prepared if the CN deal is not approved.

“We are confident that our Voting Trust meets all the standards set by the STB and believe that after a fair and thorough review by the STB, it should be approved,” said JJ Ruest, Canada’s national CEO.

Regulators will decide later whether to approve Canadian National’s plan to acquire Kansas City Southern with a voting trust. If approved, the KCS shareholders will be paid before the full review of the STB begins. CN’s bid for Kansas City Southern includes $200 in cash for each KCS share and 1.129 shares of its stock. The deal also includes about $3.8 billion in debt to Kansas City Southern.

The Surface Transport Board’s current merger rules have not been tested because it has not approved any major rail mergers since the late 1990s. It is generally stated that any deal involving one of the country’s six largest railroads needs to increase competition and serve the public interest in order to be approved. The board has also said it would consider whether a deal would destabilize the industry and prompt additional mergers.

When the STB initially rejected Canadian National’s voting trust plan for what was technically in May, regulators questioned whether Canadian National’s debt level to buy Kansas City Southern would undermine the railroad’s financial stability. Canadian National has said it believes it will remain financially sound following the deal and will pay off debt quickly as it has suspended stock buybacks. The STB also requested more details about the merger plan.

Canadian Pacific has maintained that allowing CN to purchase Kansas City Southern would hurt competition in much of the central United States because those railroads operate parallel rail lines that connect the Gulf Coast to the Midwest. CP officials have also said that CN’s plan would add rail congestion to the Chicago area, and that it would prompt other railroads to attempt a merger.


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