By Justin Franz
WASHINGTON — The Department of Justice says Canadian National’s proposed acquisition of Kansas City Southern “poses a greater risk to competition” than a Canadian Pacific-KCS merger.
On Friday, the DOJ told the U.S. Surface Transportation Board that it opposed CN getting a waiver to place KCS into a voting trust prior to federal approval. Earlier this month, the STB approved CP’s plan to put KCS into an independent trust, but it had not yet approved CN’s request. CP’s plan might be pointless though after KCS announced this week that it would instead take CN’s $33.6 billion offer.
But the letter from the DOJ might put a kink in CN’s plans to buy KCS.
“The Board should not permit the proposed CN voting trust because CN’s proposed acquisition of KCS appears to pose greater risks to competition than the risks posed by a CP-KCS merger,” DOJ attorneys wrote. “Thus, even though the terms of CN’s proposed voting trust are similar to the terms of CP’s proposed voting trust, the Board has good reason to hold CN’s proposed voting trust to a higher bar.”
The DOJ filing specifically noted that there was overlap between the CN and KCS systems, specifically in Louisiana.
CP officials welcomed the news that the DOJ had concerns about the proposed CN-KCS merger.
“CP remains confident its friendly agreement is the only viable merger for KCS, as already validated by two favorable rulings by the STB. The STB approved CP’s use of a voting trust and affirmed KCS’ waiver from the new rail merger rules it adopted in 2001 because a CP-KCS combination is truly end-to-end, pro-competitive and together they would remain the smallest Class I railway,” officials wrote.