(Source: Canadian Pacific Railway press release, April 26, 2021)
CALGARY — Canadian Pacific Railway Limited issued the following statement about Canadian National’s (CN’s) request to name David Starling as intended trustee in its unsolicited bid of Kan-sas City Southern (KCS):
David Starling has advised us of CN’s request, and we have no objection.
As we have said previously, Mr. Starling is a fine choice as a trustee – that is why we appointed him to this role in the CP-KCS transaction. As a former President and CEO of KCS, he knows the business well and is independent of CP. Mr. Starling’s expertise and leadership is clearly valued by both CP and CN. Should Mr. Starling agree, we are honored that CN has chosen the same trustee we have, however, the two proposals themselves are much different.
No matter who the trustee is of the CN proposal, it does nothing to address or overcome the prob-lems with CN’s proposed use of a voting trust. It is at best putting a band-aid on a compound frac-ture. The problem with CN’s use of a voting trust is NOT the trust agreement or the trustee, it is an entirely separate set of public interest problems:
(a) CN and KCS compete head-to-head today, and as the Department of Justice has made clear CN buying and owning all of KCS’ stock will – trust or no trust, Mr. Starling or no Mr. Starling – change the competitive incentives of both CN and KCS while the trust is pending. Both will have an incentive to pull their competitive punches against the other.
(b) the regulatory complexity of a CN transaction – under the 2001 new rules and all that entails – means a successful outcome of the regulatory process is far less likely, and the STB will not want KCS to be conveyed to CN (even in trust) if there is a real possibility – as there is – of insoluble regulatory problems that result in KCS having to come back out of trust and be disposed of.
(c) And these issues do not even consider the prospect that CN’s acquiring KCS and putting it into trust will itself stimulate further railroad consolidation that shippers and others do not desire, and that the STB’s regulatory processes are designed to discourage.
In an April 23, 2021 decision the Surface Transportation Board confirmed that the waiver it grant-ed to KCS in 2001 is applicable to the proposed combination of CP-KCS because it would still re-sult in the smallest Class 1 railroad with the fewest overlapping routes and be end-to-end in nature.