CN makes final pitch for regulator to approve voting trust for Kansas City Southern

CN Rail locomotives are moved on tracks past cargo containers sitting on idle train cars at port in Vancouver, on Friday, February 21, 2020. (THE CANADIAN PRESS/Darryl Dyck)

Canadian National Railway Co. made its final pitch to a U.S. regulator for approval of a voting trust it wants to use in its proposed US$33.6-billion takeover of U.S. railway Kansas City Southern.

It says there's no harm if it approves the trust until a final ruling on the merits of the transaction is handed down many months from now.

In a 374-page submission to the Surface Transportation Board, the Montreal-based railway says it will demonstrate the merits of a CN-KCS combination during a “robust, careful review process that will allow full stakeholder input.”

For now, however, CN says the only question before the STB is whether the voting trust agreement satisfies the test for such agreements under its major rail consolidation procedures.

CN says it passes that test because the agreement insulates KCS from CN control during the trust period, causes no harm to KCS and serves the public interest by placing CN on an equal footing with other bidders.

Even if CN is required to sell KCS because the merger is rejected, the U.S. railway will be an intact entity.

In its submission, CN refutes claims of Calgary rival Canadian Pacific Railway Ltd. by arguing there is no risk of financial harm to CN because it has the financial strength to quickly retire the large debt associated with “this unique transaction.”

“After more than two months of CP claiming that a CN-KCS combination would be 'anticompetitive,' CP's actual comments reveal that the emperor has no clothes,” CN says.

A voting trust would allows Kansas City Southern shareholders to receive US$325 per share in stock and cash without waiting for the deal itself to be approved.

This report by The Canadian Press was first published July 7, 2021.