CN and KCS make joint filing with the STB for voting trust approval

Less than one week after Class I railroads CN and KCS said they reached a deal and entered into a definitive merger agreement, with CN acquiring KCS for $33.6 billion, which they said will “create the premier railway of the 21st century,” the companies announced today that they have made a joint filing with the Surface Transportation Board (STB).

The filing, CN and KCS said, is a renewed motion for approval of its voting trust, which outlines the case for approval of the voting trust that will “enhance competition, spur economic growth, and realize the benefits of a fully end-to-end transportation network across the continent.”

And they added that the voting trust addresses the following:

• protects against premature control of KCS and protects KCS’ financial health;
• that CN remains financially sound; and
• the substantial benefits to be gained from the transaction by customers and the nearly 1,100 stakeholders who have already supported the transaction

What’s more, CN said that as part of the application, it is committing to divesting KCS’ 70-mile line between New Orleans and Baton Rouge, which is less than 0.7 percent of the approximately 27,000 route-miles the two companies operate. This commitment eliminates the sole area of overlap between the CN and KCS networks, thereby making the combination an end-to-end transaction, it said, adding that this commitment, plus CN’s multiple other pro-competitive commitments, including keeping existing gateways open on commercially reasonable terms, addresses any competitive concerns.

“We believe our early commitment to eliminating the minimal rail overlap and to laying out the case for a CN-KCS combination should allow the STB to approve our voting trust,” said JJ Ruest, president and chief executive officer of CN, in a statement. “A trust is an essential step so KCS shareholders can receive the full value of their shares while the STB considers our case for a combined, end-to-end rail network and the significant public benefits of connecting the continent. This combination will promote growth and compete with the trucking industry for long-haul movements. It offers more choice for rail customers, port operators, employees, stakeholders and communities.”

Patrick J. Ottensmeyer, president and chief executive officer of KCS, said in the same statement that combining KCS with CN is compelling for KCS’ customers, employees, shareholders and the local communities in which it operates.

“We urge the STB to fully consider the benefits of this combination, and to respect KCS’ judgment about its preferred merger partner, so that we can realize the tremendous public interest advantages of the CN-KCS partnership on behalf of our stakeholders, many of whom have expressed overwhelming support,” he said.

 The companies also observed that this application satisfies every aspect of voting trust framework, including: no unlawful control; public interest benefits; CN remaining financially strong; no risk to competition; and preserves KCS’ choice of superior partner.

To read more about this deal, please click here.