Regulators on Thursday approved Canadian Pacific’s plan for acquiring Kansas City Southern if that railroad picks CP’s $25 billion bid over rival Canadian National’s $33.7 billion offer.
The federal Surface Transportation Board said it would accept Canadian Pacific’s plan to set up a voting trust that would acquire Kansas City Southern and own the railroad while the board reviews the deal to determine whether to approve it. But approving the trust agreement doesn’t mean regulators would eventually OK the deal.
The board has said it will review any deal involving Kansas City Southern carefully to determine if it would enhance competition and serve the public interest. That review could take more than 18 months. If regulators ultimately reject the deal, then the voting trust would sell off Kansas City Southern, so it could remain independent.
Canadian National has submitted a nearly identical plan to set up a voting trust if Kansas City Southern decides to accept its bid. The board has yet to rule on that voting trust proposal, which was submitted about a month after Canadian Pacific’s.
The two Canadian railroads have been in a public-relations battle, with each portraying its bid as superior. Meanwhile, Kansas City Southern is reviewing both proposals to determine which would be best.
Canadian Pacific has said that combining Kansas City Southern and Canadian National would hurt competition because both those companies have rail lines that compete for business between the Midwest and the Gulf Coast. Canadian Pacific’s network connects to Kansas City Southern in Kansas City, Missouri, but those two railroads don’t overlap elsewhere.
Canadian National has said it doesn’t believe its offer would hurt competition, and it is confident it could address any competitive concerns later in the review process after its voting trust plan is approved if Kansas City Southern chooses its offer.