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STB takes competition measures on merger between CN and KCS

The US Surface Transportation Board (STB) has begun taking antitrust action over the possible merger between Canadian National (CN) and Kansas City Southern (KCS).

First of all, Canadian Pacific Railway (CP) and KCS, two of the seven Class I companies that handle long-distance rail traffic in the United States, announced a merger agreement in March.

Then, in April, another Class I rail company, CN, submitted what it called a “superior proposal” to acquire KCS, which was accepted in May.

Either agreement, if approved by shareholders and federal regulators, would be the largest consolidation of the major railroads in several decades and create the first rail network to serve Canada, the United States and Mexico under a single corporate owner.

STB

While this could lead to better service for some carriers, it could also have adverse consequences for freight competition, according to an analysis by the US Congress.

According to the same source, any transaction is likely to undergo a lengthy review by the STB.

On August 31, the five STB commissioners voted to reject CN’s request to create a “voting trust” to hold KCS shares, an agreement that would have allowed CN to acquire shares while the merger is still pending before the Council.

The decision follows President Biden’s July executive order encouraging federal agencies to take steps to preserve competition throughout the economy.

While STB’s decision may or may not reflect the prospects for the merger, it indicates that regulators are closely considering the potential implications.

CP and CN, both headquartered in Canada, are among the survivors of expanded consolidation in the U.S. rail industry, along with Union Pacific and BNSF in the western United States, CSX and Norfolk Southern in the east, and KCS from north to south through the center of the country and into Mexico.

 

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