DOJ Says CN Bid for KCS “appears to pose greater risks to competition than CP agreement”
CP-KCS Remains Only Class 1 Transaction with Ability to Close into Voting Trust
CALGARY, AB, May 14, 2021 /PRNewswire/ – Canadian Pacific Railway Limited (TSX: CP) (NYSE: CP) (“CP”) today issued the following statement in response to the Department of Justice (“DOJ”) filing with the Surface Transportation Board (“STB”) regarding Canadian National’s (“CN”) proposed use of a voting trust in connection with its proposed combination with Kansas City Southern (“KCS”).
CP concurs with the DOJ’s objection to CN’s application forproposed use of a voting trust on the grounds that a CN merger with KCS would pose greater risks to competition than the CP-KCS agreement. The filing notes: “A CN-KCS transaction poses additional dangers to competition stemming from the potential elimination of direct, ‘parallel’ competition on routes served by both railroads, for example between Baton Rouge and New Orleans.” CN’s proposed use of a voting trust would create “threats to competition [that] would be present immediately after the CN voting trust is consummated.” And, DOJ added, “[i]t is particularly important to protect” the incentives of CN and KCS “to compete where, as here, CN and KCS appear to compete head-to-head on multiple parallel routes.”
The filing continues: “On May 6, 2021, the Board approved the proposed CP-KCS voting trust in Finance Docket No. 36500. Notwithstanding this decision, 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’s position is consistent with CP’s assessment that CN’s proposal is illusory and offers unattainable value to KCS’ shareholders.
CP remains confident its friendly agreement is the only viable merger for KCS, as already validated by two favorable rulings by the STB. The STB approved CP’s use of a voting trust and affirmed KCS’ waiver from the new rail merger rules it adopted in 2001 because a CP-KCS combination is truly end-to-end, pro-competitive and together they would remain the smallest Class 1 railway.
For more information on the transaction and the benefits it is expected to bring to the full range of stakeholders, visit FutureForFreight.com.
FORWARD-LOOKING STATEMENTS AND INFORMATION
This news release includes certain forward-looking statements and forward looking information (collectively, FLI). FLI is typically identified by words such as “anticipate”, “expect”, “project”, “estimate”, “forecast”, “plan”, “intend”, “target”, “believe”, “likely” and similar words suggesting future outcomes or statements regarding an outlook. All statements other than statements of historical fact may be FLI.
Although we believe that the FLI is reasonable based on the information available today and processes used to prepare it, such statements are not guarantees of future performance and you are cautioned against placing undue reliance on FLI. By its nature, FLI involves a variety of assumptions, which are based upon factors that may be difficult to predict and that may involve known and unknown risks and uncertainties and other factors which may cause actual results, levels of activity and achievements to differ materially from those expressed or implied by these FLI, including, but not limited to, the following: the timing and completion of the transaction, including receipt of regulatory and shareholder approvals and the satisfaction of other conditions precedent; interloper risk; the realization of anticipated benefits and synergies of the transaction and the timing thereof; the success of integration plans; the focus of management time and attention on the transaction and other disruptions arising from the transaction; estimated future dividends; financial strength and flexibility; debt and equity market conditions, including the ability to access capital…