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STB Advances CN-KCS Voting Trust Review
June 09, 2021
STB Advances CN-KCS Voting Trust Review Written by Marybeth Luczak, Executive Editor
The Surface Transportation Board (STB) has directed proposed merger partners CN and Kansas City Southern (KCS) to submit by June 14 certain financial documents, which will inform public comments on their voting trust agreement.
In its June 8 filing setting the voting trust review schedule (download below), STB said comments are due June 28, and the deadline for CN and KCS to respond is July 6. A final STB decision could come by mid-July, at the earliest.
The STB noted that its request for CN-KCS financial documents debt commitment letters plus company disclosure schedules and capital allocation policies, among others is part of a “more cautious approach to proposed voting trusts” following the adoption of new major merger rules in 2001.
Keith Creel (left) and Jason Seidl
As part of the NEARS (Northeast Association of Rail Shippers) virtual conference, Cowen and Company Managing Director and Railway Age Wall Street Contributing Editor Jason Seidl hosted Canadian Pacific President and CEO Keith Creel in a “fireside chat” to discuss the proposed merger between CP and Kansas City Southern.
“Creel was adamant that CP’s proposal was the least risky as it did not have any overlap compared to a notable amount at CN,” Seidl said. “He also did not sound like he would increase his bid if KCS chose to take CN’s offer. He reinforced commentary that with the CP/KCS combination, extended length-of-haul will be offered to customers. The west side of the Midwest (North Dakota, South Dakota, Wisconsin) was highlighted as having a competitive opportunity to reach new markets in Texas and Mexico.”
As soon as the STB issued its decision granting Kansas City Southern a waiver from prevailing merger rules established about 20 years ago, KCS following the terms of its existing merger agreement with Canadian Pacific said it would now consider CN’s counter-offer.
KCS reported April 24 that its Board of Directors has determined that the unsolicited merger proposal it received from CN on April 20 might end up “superior” to the KCS-Canadian Pacific (CP) merger agreement announced March 21. KCS now intends to engage in discussions with CN. Both CP and CN have responded, each with language used before, reiterating points that have been expressed several times within the past week.
CP: ‘Bullish’ on 2021
CP: ‘Bullish’ on 2021 Written by Marybeth Luczak, Executive Editor
CP’s operating ratio, which included a $33 million expense related to the Kansas City Southern (KCS) acquisition, came in at 60.2% for the first three months of 2021. This is a 100 basis-point increase from 59.2% in the prior-year period. Adjusted, the first-quarter 2021 OR improved 70 basis points to 58.5%.
“The strong demand environment, particularly across bulk, merchandise and domestic intermodal, coupled with our commitment to the foundations of Precision Scheduled Railroading enabled our success in the first quarter,” Canadian Pacific (CP) President and CEO Keith Creel reported during the merger-bound railroad’s earnings announcement.