CALGARY, AB, July 26, 2021 /PRNewswire/ - Canadian
Pacific Railway Limited (TSX: CP) (NYSE: CP) ("CP") today announced
that U.S. Rep. Peter DeFazio, Chair
of the U.S. House Transportation and Infrastructure Committee,
submitted a letter to the Surface Transportation Board opposing
CN's request for a voting trust.
The text from the letter reads as follows:
Ms. Cynthia Brown
Chief, Section of Administration
Surface Transportation Board
395 E Street, SW
Washington, DC 20423
Re: Finance Docket No. 36514, Canadian National Railway Company,
et al. – Control – Kansas City Southern Railway Company, et al.
Dear Ms. Brown:
I am writing to express opposition to the voting trust proposed
by Canadian National Railway Company (CN) in its proposed merger
with Kansas City Southern Railway Company (KCS). I am concerned
that this proposed trust is not in the public interest. The trust
would reduce competition and prejudice the outcome of the Surface
Transportation Board's merger proceeding.
In its May 14, 2021, submission to
this docket, the Antitrust Division of the U.S. Department of
Justice explained how voting trusts reduce competition both in
general for railroad mergers and in particular to the consideration
of a voting trust for CN and KCS. In general, putting two formerly
competitive businesses under a single holding company immediately
reduces the parties' incentives to engage in competition. While the
Surface Transportation Board regularly allowed railroad trusts
throughout the many railroad consolidations of the 1980s and 1990s,
the Board has made the requirements to approve a voting trust more
stringent since 2001 as part of an overall reform of merger rules.
Now, according to 49 CFR 1180.4(b)(4)(iv), applicants must
demonstrate that trusts would be in the public interest. Approving
a CN-KCS trust would signal to the rest of the rail industry that
the STB is engaging in business as usual, despite the requirement
to consider the public interest, and could launch a new round of
mergers.
Specifically with regard to the potential for a CN-KCS trust, I
am concerned that approximately 300 current customers
overlap on the CN and KCS networks. A single holding company
responsible for this traffic would likely change rail traffic
patterns in the significant areas of parallel service overlap and
that would reduce the rail service options these 300 customers
currently enjoy. I am also troubled that this combination of Class
I railroads serving all three nations in North America will exacerbate U.S. job losses
from cross-border trade agreements that prioritize profits over
people and inflict harm on worker's rights, consumer safety, and
the environment.
I trust that the Surface Transportation Board will look at the
specific facts of this action and conclude that approving a trust
is too much, too soon. Too much authority in one company to somehow
keep two companies competing against each other that have
significant service overlap and too soon because allowing the trust
creates a new floor purchase price for any other potential
competitive bidders for KCS railroad.
Sincerely,
Peter A. DeFazio
Chair
CP-KCS remains the only viable Class 1 combination
As
previously announced, CP continues to pursue its application
process to acquire KCS so that the pro-competitive CP-KCS
combination can be reviewed by the STB and implemented without
undue delay, in the event KCS' agreement with CN is terminated or
CN is otherwise unable to acquire control of KCS.
The STB has already 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 the only viable Class 1 combination.
A CP-KCS transaction achieves the goals of President Biden's
recent executive order that sent a clear message that no rail
mergers should be allowed that reduce competition or hurt passenger
service, and that the U.S. economy needs more competition among
railways.
CP-KCS would raise none of the anti-competitive concerns cited
by hundreds of shippers and other stakeholders opposing CN-KCS.
Instead, CP-KCS would enhance competition, create new and
stronger competitive single-line options against existing
single-line routes, as well as taking trucks off the highway.
CP-KCS would maintain all existing freight rail gateways and
maintains competition in the Baton
Rouge to New Orleans
corridor, while creating competition on new north-south lanes
between Western Canada, the Upper
Midwest and the Gulf Coast and Mexico.
CN-KCS brings with it more challenges for existing Amtrak
service on CN's lines south of Chicago that already have a history of
operating issues and one of the worst on-time performance records
in the industry, and challenges for the desired establishment of
future passenger service in Louisiana. In contrast, CP has consistently
received an A rating from Amtrak, leading the industry for the
previous five years-plus, in its annual host railroad report card
recognizing its industry-leading on-time performance
record. CP is willing to host intercity passenger rail service
between New Orleans and
Baton Rouge, an outcome with far
more operational flexibility and less risk to Louisiana taxpayers.
A CP-KCS transaction would diminish the
pressure for downstream railroad consolidation by
preserving the basic six-railroad structure of the North American
rail network: two in the west, two in the east and two in
Canada, each with access to the
U.S. Gulf Coast. By contrast, a CN-KCS transaction would
fundamentally disrupt this balance.
CP-KCS would be a positive step toward more competition – not
less – in the freight rail industry and would be better for Amtrak,
while CN-KCS would reinforce the problems the order is trying to
solve.
For more information on the benefits of a CP-KCS combination and
the risks that a CN-KCS transaction would pose to the railway
industry and North America, visit
FutureForFreight.com.
FORWARD-LOOKING STATEMENTS AND INFORMATION
This news release includes certain forward-looking statements
and forward looking information (collectively, FLI). FLI is
typically identified by words such as "anticipate", "expect",
"project", "estimate", "forecast", "plan", "intend", "target",
"believe", "likely" and similar words suggesting future outcomes or
statements regarding an outlook. All statements other than
statements of historical fact may be FLI.
Although we believe that the FLI is reasonable based on the
information available today and processes used to prepare it, such
statements are not guarantees of future performance and you are
cautioned against placing undue reliance on FLI. By its
nature, FLI involves a variety of assumptions, which are based
upon factors that may be difficult to predict and that may involve
known and unknown risks and uncertainties and other factors which
may cause actual results, levels of activity and achievements to
differ materially from those expressed or implied by these FLI,
including, but not limited to, the following: changes in business
strategies and strategic opportunities; estimated future dividends;
financial strength and flexibility; debt and equity market
conditions, including the ability to access capital markets on
favourable terms or at all; cost of debt and equity capital;
potential changes in the CP share price; the ability of management
of CP, its subsidiaries and affiliates to execute key priorities;
general North American and global social, economic, political,
credit and business conditions; risks associated with agricultural
production such as weather conditions and insect populations;
the availability and price of energy commodities; the effects
of competition and pricing pressures, including competition from
other rail carriers, trucking companies and maritime shippers in
Canada and the U.S.; North
American and global economic growth; industry capacity; shifts in
market demand; changes in commodity prices and commodity demand;
uncertainty surrounding timing and volumes of commodities being
shipped via CP; inflation; geopolitical instability; changes in
laws, regulations and government policies, including regulation of
rates; changes in taxes and tax rates; potential increases in
maintenance and operating costs; changes in fuel prices; disruption
in fuel supplies; uncertainties of investigations, proceedings or
other types of claims and litigation; compliance with environmental
regulations; labour disputes; changes in labour costs and labour
difficulties; risks and liabilities arising from derailments;
transportation of dangerous goods; timing of completion of capital
and maintenance projects; sufficiency of CP's budgeted capital
expenditures in carrying out CP's business plan; services and
infrastructure; the satisfaction by third parties of their
obligations to CP; currency and interest rate fluctuations;
exchange rates; effects of changes in market conditions and
discount rates on the financial position of pension plans and
investments; trade restrictions or other changes to international
trade arrangements; the effects of current and future multinational
trade agreements on the level of trade among Canada and the U.S.; climate change and the
market and regulatory responses to climate change; anticipated
in-service dates; success of hedging activities; operational
performance and reliability; regulatory and legislative decisions
and actions; public opinion; various events that could disrupt
operations, including severe weather, such as droughts, floods,
avalanches and earthquakes, and cybersecurity attacks, as well as
security threats and governmental response to them, and
technological changes; acts of terrorism, war or other acts of
violence or crime or risk of such activities; insurance coverage
limitations; and the pandemic created by the outbreak of COVID-19
and resulting effects on CP's business, operating results, cash
flows and/or financial condition, as well as resulting effects on
economic conditions, the demand environment for logistics
requirements and energy prices, restrictions imposed by public
health authorities or governments, fiscal and monetary policy
responses by governments and financial institutions, and
disruptions to global supply chains.
We caution that the foregoing list of factors is not exhaustive
and is made as of the date hereof. Additional information about
these and other assumptions, risks and uncertainties can be
found in reports and filings by CP with Canadian and U.S.
securities regulators. Reference should be made to "Risk Factors"
and "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Forward-Looking Statements" in CP's
annual and interim reports on Form 10-K and 10-Q. Due to the
interdependencies and correlation of these factors, as well as
other factors, the impact of any one assumption, risk or
uncertainty on FLI cannot be determined with certainty.
Except to the extent required by law, we assume no obligation to
publicly update or revise any FLI, whether as a result of new
information, future events or otherwise. All FLI in this news
release is expressly qualified in its entirety by these cautionary
statements.
ABOUT CANADIAN PACIFIC
Canadian Pacific (TSX: CP) (NYSE: CP) is a transcontinental
railway in Canada and the United States with direct links to major
ports on the west and east coasts. CP provides North American
customers a competitive rail service with access to key markets in
every corner of the globe. CP is growing with its customers,
offering a suite of freight transportation services, logistics
solutions and supply chain expertise. Visit www.cpr.ca to see
the rail advantages of CP. CP-IR
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SOURCE Canadian Pacific