Updated: April 22, 3:45 p.m.
By Justin Franz
CALGARY — Canadian Pacific CEO Keith Creel said Wednesday he is so confident that the U.S. Surface Transportation Board would never approve a merger between Kansas City Southern and Canadian National that his company will not be upping its $29 billion offer for KCS.
Creel made the comments during CP’s First Quarter conference call, a session that normally looks back at the railroad’s recent financial performance. But on Wednesday the only thing anyone wanted to talk about was CN’s surprise offer to buy KCS for $33.7 billion just a month after CP and KCS announced they would seek a merger. During the call, Creel dismissed CN’s offer as unrealistic and anticompetitive. When asked if CP would offer KCS shareholders more money, Creel was direct.
“It’s nothing that we’re considering,” he said.
Creel noted that he was in the unique position of having worked for both CN and CP. He got his start as a trainmaster on the Illinois Central before it was taken over by CN. Creel was a student of the late Hunter Harrison, the man often hailed as the creator of Precision Scheduled Railroading, a system he implemented while leading both CP and CN. During Wednesday’s call, Creel was unusually direct in noting that few of the people who helped CN become one of the leading Class I railroads were there anymore.
He also harped on his belief that a CN-KCS merger would be anticompetitive, noting he can think of numerous shippers in the Midwest and South that would be negatively impacted by a merger of the two, particularly areas where CN and KCS are already competing. He also reiterated the belief that a CN-KCS merger would be destabilizing for the North American rail network because it would make CP the odd man out and force it to find another Class I partner.
“They either don’t know how much damage this proposed combination could create or worse yet they do and they prefer not to share the truth,” Creel said.
Creel’s aggressive stance was surprising talk for a modern railroad CEO, a group that in recent years — with the exception of the late Harrison — are a reserved bunch. But perhaps it shows just how high the stakes are for CP. During Wednesday’s call, business journalist Howard Green, who wrote the 2018 book “Railroader” about the late Harrison, tweeted, “The gloves are clearly off.”
The day after Creel blasted its rival, the CN defended itself in a letter to the KCS board, alleging that CP was the one misleading investors.
“Rather than acknowledge the clear and substantial superiority of CN’s proposal for KCS shareholders, CP has sought to distract investors and attack CN’s proposal with a variety of inaccurate and unfounded assertions,” President and CEO JJ Ruest wrote. “CP’s claims are not intended to benefit KCS shareholders, but to advance CP’s own interests and to deprive KCS shareholders of the full value for their shares.”