U.S. railway regulator gives 20 days for public comments about CN railway acquisition

A CN Rail diesel electric locomotive moves through the rail yard in Dartmouth, N.S. on March 29, 2018. THE CANADIAN PRESS/Andrew Vaughan

June 08, 2021 - 4:29 PM

WASHINGTON - The U.S. railway regulator says the public has 20 days to voice their feelings about a proposed Canadian National Railway Co. voting trust relating to its proposed acquisition of Kansas City Southern.

The Surface Transportation Board says it will accept written submissions until June 28 with the Montreal-based CN replying July 6.

The U.S. railway's board backed a merger offer from Canadian National that implies an enterprise value for KCS of US$33.6 billion.

Approval of the voting trust would allow KCS shareholders to receive US$325 per share in stock and cash if they approve the transaction without waiting for the deal itself to be approved.

KCS would be independently managed pending completion of the STB's review of the proposed transaction.

CN says it has received more than 1,400 letters of support, including nearly 300 filed June 2 backing the use of the voting trust.

"We are confident that the STB will approve our voting trust and allow us to complete the transaction so that we can deliver the many compelling benefits of this combination to customers, ports, employees, communities and the environment," the railway says in a news release.

Rival Canadian Pacific Railway Ltd. says it is preparing its own full merger application to acquire KCS because it believes the regulator won't approve the CN-KCS voting trust as it did the CP-KCS voting trust.

KCS backed away from the Calgary-based CP's offer after determining that CN's proposal was superior. CN will provide KCS with the US$700-million break fee.

CP says it will file comments explaining why "the public interest costs of CN's proposed voting trust outweigh the non-existent benefits." It says more than 130 shippers, communities, labour organizations and other stakeholders have already told the STB about their opposition to CN's voting trust proposal.

"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."

This report by The Canadian Press was first published June 8, 2021.

Companies in this story: (TSX:CNR, TSX:CP)