Skip to main content
Access every election story that matters
Enjoy unlimited digital access
$1.99
per week for 24 weeks
Access every election story that matters
Enjoy unlimited digital access
$1.99
per week
for 24 weeks
// //

Canadian National has made its final pitch to regulators for preliminary approval of its $33.6-billion acquisition of Kansas City Southern railroad.

The Canadian railroad reiterated its main arguments for the deal in a detailed filing with the Surface Transportation Board on Tuesday. Earlier this spring, regulators indicated they would take a cautious approach to approving Canadian National’s plan to set up a voting trust that would acquire Kansas City Southern and hold the railroad during the STB’s lengthy review of the overall deal.

More than 2,000 letters were filed with regulators with most of them supporting the deal, but it also attracted strong opposition from rival Canadian Pacific railroad and several hundred commenters who raised concerns about the merger hurting competition. Canadian Pacific lost out on the chance to acquire Kansas City Southern when it refused to increase its original $25-billion bid for the smaller U.S. railroad, but CP has continued to seek STB approval for its combination with Kansas City Southern, so it will be prepared if the CN deal fails to get approval.

Story continues below advertisement

“We are confident that our voting trust meets all the standards set forth by the STB and believe that, after a fair and thorough review by the STB, it should be approved,” Canadian National CEO JJ Ruest said.

Regulators will decide later whether to approve Canadian National’s plan to acquire Kansas City Southern with a voting trust. If it is approved, KCS shareholders would get paid before the STB embarks on its full review. CN’s bid for Kansas City Southern includes $200 cash and 1.129 shares of its stock for every KCS share. The deal also includes about $3.8-billion in Kansas City Southern’s debt.

The Surface Transportation Board’s current merger rules haven’t been tested because it hasn’t approved any major railroad mergers since the 1990s. It has generally said that any deal involving one of the nation’s six largest railroads needs to enhance competition and serve the public interest to get approved. The board has also said it would consider whether any deal would destabilize the industry and prompt additional mergers.

When the STB initially rejected Canadian National’s voting trust plan on a technicality in May, regulators questioned whether the level of debt Canadian National plans to take on to buy Kansas City Southern would undermine the financial stability of the railroad. Canadian National has said it believes it would remain financially sound after the deal and it would pay down the debt quickly because it has suspended stock repurchases. The STB also requested more details about the merger plan.

Canadian Pacific has maintained that allowing CN to buy Kansas City Southern would hurt competition across much of the central United States because those railroads operate parallel rail lines that connect the Gulf Coast to the Midwest. CP officials have also said that CN’s plan would add to rail congestion in the Chicago area, and it would likely inspire other railroads to attempt mergers.

Canadian National said it believes it can address the competitive concerns through its operating plan and by selling 70 miles of track between New Orleans and Baton Rouge, Louisiana where Kansas City Southern’s network directly overlaps with CN’s tracks. Canadian National said that after the merger it would also maintain its connections with other railroads to allow customers to ship goods using a combination of different railroads if they choose to.

Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies