WASHINGTON— The Surface Transportation Board (STB) on Aug. 31 issued a unanimous determination rejecting the usage of a voting belief settlement in reference to the proposed transaction between Canadian National Railway (CN) and Kansas City Southern Railway (KCS). The determination marks a major setback within the months-long saga that has seen KCS take into account acquisition proposals from each CN and Canadian Pacific (CP).
“Here, the board finds that applicants have not demonstrated that their use of a voting trust would have public benefits, and further finds that there are public interest risks to competition and divestiture associated with the use of a voting trust in the context of the impending control application,” the STB famous in its determination. “Accordingly, the board finds that the use of a voting trust would not be consistent with the public interest and will deny applicants’ motion for voting trust approval.”
Following the STB’s announcement, CN issued a response noting its disappointment within the determination, noting that it now plans to judge “the options available to us in light of the STB’s decision.”
“We remain confident that our pro-competitive, end-to-end combination is in the public interest and that it would offer unparalleled opportunities and benefits for customers, employees, the environment and the North American economy,” CN stated. “The combined company would create the premier railway for the 21st century and establish seamless single-line service from Canada, through the United States and into Mexico.
“Since the proposed combination with KCS was announced, we have been encouraged by the overwhelming support from both companies’ customers, employees, local communities and shareholders. We continue to believe that the combination of CN and KCS would enhance competition, expand North American trade and power economic prosperity, provide new and faster routes, increase supply chain efficiency and deliver other benefits to the public good.”
KCS additionally expressed its disappointment within the determination.
“KCS intends to adjourn the special meeting of stockholders for KCS stockholders to vote on the previously announced definitive merger agreement with CN and other proposals,” KCS stated. “The special meeting is currently scheduled to take place at 9 a.m., Central Time, on Sept. 3, 2021.”
CP, in the meantime, known as the STB determination “the right one for rail shippers, the freight rail industry and the North American economy.”
“The STB decision clearly shows that the CN-KCS merger proposal is illusory and not achievable,” stated Keith Creel, president and chief government officer of CP. “Knowing this, we believe the Aug. 10 CP offer to combine with KCS, which recognizes the premium value of KCS while providing regulatory certainty, ought to be deemed a superior proposal. Today, we have notified the KCS board of directors that our Aug. 10 offer still stands to bring this once-in-a lifetime partnership together.”
CP’s proposal represents an enterprise worth of roughly $31 billion, whereas CN’s proposal implies a complete enterprise worth of $33.6 billion.