Shippers Ask Regulators To Look Hard At KC Southern-Canadian Pacific Deal

Competing railroads and major shippers associations don’t want federal regulators to give a free ride to the proposed sale of Kansas City Southern to Canadian Pacific Railway.

Four of five Class I railroads and a handful of associations representing shippers have filed motions asking the Surface Transportation Board to use newer, more stringent rules to determine if the deal would harm competition, Freightwaves reported. Officials of Canadian Pacific and KC Southern have expressed hopes that their deal will be judged by the older rules.

KC Southern said last month that it had reached an agreement to sell toCanadian Pacific in a cash-and-stock deal with an enterprise value of US$29 billion. The combination, to be named Canadian Pacific Kansas City, would create a rail network stretching across Canada, through the United States, and through to the Mexican port city of Lazaro Cardenas.

The actions of the Surface Transportation Board are a formidable hurdle for the deal — as are apparent in features of the transaction. Canadian Pacific’s offer includes a two-step process, with KC Southern stock first put into an independent voting trust after receiving shareholder approval. The trust will insulate KC Southern from Canadian Pacific control until the Surface Transportation Board gives its blessing.

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