MONTREAL — Canadian National today filed its Kansas City Southern merger agreement with federal regulators, and asked the Surface Transportation Board to adopt an expedited schedule for reviewing its request to put KCS into a voting trust.
In what CN termed a procedural move, the STB on Monday denied CN’s request to place KCS into voting trust. The board said CN’s application was incomplete because CN had not yet filed its merger application.
CN said it was preparing a “renewed motion for approval” of its voting trust, which it would file with the STB by Friday. CN asked that the board accept public comments on its voting trust through May 26 and allow CN to reply to those comments through May 28.
The board on Monday said it would take a more cautious approach to a KCS voting trust involving a CN-KCS merger and raised concerns about the level of debt CN would use to fund its $33.6 billion deal [see “Federal regulators deal blow to CN-KCS deal …,” Trains News Wire, May 17, 2021].
CN said its formal request for a voting trust will address the STB’s concerns.
“CN will show that the significant public benefits of the transaction could only be achieved through use of a voting trust in these circumstances, and that these benefits substantially outweigh any potential public interest harm. As part of that showing, CN will demonstrate that its strong balance sheet, cash flows and ratings profile provide certainty that CN has the financial integrity to satisfy the STB’s public interest analysis,” CN wrote.
CN expects to win regulatory approval for the voting trust by early June, Chief Operating Officer Rob Reilly told an investor conference today. KCS shareholders are set to vote on CN’s merger offer in July. After receiving approval from regulators in Mexico, CN would place KCS into a voting trust later this year, allowing KCS shareholders to receive their cash and shares from CN.
The STB will judge a CN-KCS merger under the more stringent 2001 merger rules.
The board earlier this month said it would review the proposed CP-KCS merger under its old merger rules. The STB also granted CP’s request to place KCS into a voting trust.
CP, which reached a friendly $29 billion merger deal with KCS in March, has until later this week to respond to the proposed CN-KCS merger.
