(Montreal) Canadian National (CN) is reinvigorated in the sale of Kansas City Southern (KCS) to its rival, the Canadian Pacific Railway (CP). The Montreal rail carrier is asking regulatory authorities that a KCS line be excluded from the transaction and sold to it.
Updated at 3:39 p.m. yesterday
CN is asking the Surface Transportation Board (STB) to make CP’s purchase of KCS conditional on the divestiture of the Springfield line, which connects Kansas City, Missouri, to the municipalities of Springfield and East St. Louis, in Illinois.
CN alleges that CP and KCS would not intend to invest in the Springfield line and would favor an existing parallel line. The Montreal company promises to invest 250 million US in the line, she wrote in a notice of intention filed Wednesday evening with the STB. It does not specify over how many years this amount would be invested. According to her, the promised investments would preserve competition in the transportation market in the Midwest.
CP responds that CN’s claims are “misleading”. “We are not going to reduce the service on any line, including the one mentioned, the company reacts in a press release. We will maintain the existing service and we will not redirect ridership to other lines, contrary to what CN is claiming. The company says it anticipates an increase in traffic of around 30% on the route in question.
The clash of the Canadian rail transport giants reignites a fierce battle between the two rivals over the future of KCS. After an initial bid in March, CP saw CN go up with an offer that KCS deemed superior to its own. This was scrapped in September, however, when the US STB denied CN the use of a voting trust for its offer on KCS, saying it would be bad for competition. KCS shareholders finally approved CP’s US $ 31 billion offer in December.
Benoit Poirier, of Desjardins Capital Markets, believes that the disposal of assets could be a logical option as the STB pays close attention to increasing competition. The financial analyst believes, however, that at least four other railroads could be interested in a possible divestment.
CP says the assets CN’s eye is a “significant” part of the strategic plan of the new merged entity. After the transaction, CP wants to generate nearly US $ 1 billion in synergies in three years by competing with local rail carriers and the trucking industry. Mr. Poirier believes, however, that the divestiture of the Springfield line would not change the fundamental aspects of the proposed acquisition of CP.
On the Toronto Stock Exchange in the late afternoon, CP’s stock was up $ 1.69, or 1.78%, to $ 96.43. CN stock, for its part, was down $ 0.59, or 0.38%, to $ 153.46.