Canadian Pacific Railway (CP) welcomed the Surface Transportation Board's (STB) decision to refuse Canadian National (CN) and Kansas City Southern's (KCS) joint motion for voting trust approval.

"The STB decision clearly shows that the CN-KCS merger proposal is illusory and not achievable," said Keith Creel, CP President and CEO. "Knowing this, we believe the August 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."

He added that CP have notified the KCS Board of Directors that the company's August 10 offer still stands to push the CP-KCS merger.

"CP has always maintained that the CN-KCS combination and the proposed CN voting trust is not in the public interest," Creel said in the letter it sent to KCS Board of Directors. "Hundreds of rail shippers, community leaders, elected officials and other stakeholders have voiced those same concerns and today the STB agreed."

Creel added: "CP-KCS is the only true end-to-end Class 1 combination that serves the public interest preserving and enhancing competition for customers and enabling a stronger North American rail network connecting Canada, the United States and Mexico."

"CP-KCS is a superior combination that has a path to approval and deal certainty for the KCS shareholders," he continued.

The CP chief noted that as previously announced, CP continues to pursue its application process for a potential acquisition of KCS so that the STB can review the pro-competitive CP-KCS combination without undue delay.

STB's decision cited

Meanwhile, CP said in rejecting the proposed CN-KCS voting trust, the STB recognized the "trust was not consistent" with the public interest and the CN-KCS combination is "anticompetitive."

In its decision the STB wrote, "…the Board finds that (CN and KCS) have not demonstrated that their use of a voting trust would be consistent with the public interest. Applicants have shown no benefit from the use of a voting trust to stakeholders other than KCS and CN. At the same time, the use of a voting trust, in the context of the impending control application, would raise risks that threaten to undermine the public interests," it added.

In comparing the CN-KCS combination with the proposed CP-KCS transaction, the STB said "the two transactions are substantially different: the proposed CP-KCS transaction … is an end-to-end merger, whereas, here, the CN system overlaps with that of KCS."

CP insisted that while the CN-KCS merger proposal "fails the public interest and competition tests, a CP-KCS combination would create more competition in the freight rail industry and would be better for Amtrak."

It said such a merger brings more competition among railways and protects obligations to passenger service.