Ag Industry Voices Opposition to CN-KCS’ Proposed Use of Voting Trust, Share Anti-Competitive Concerns

Canadian Pacific Railway Limited (“CP”) announced that grain and other shippers across North Dakota, South Dakota and Minnesota have submitted letters to the Surface Transportation Board (“STB”) opposing Canadian National (“CN”) and Kansas City Southern’s (“KCS”) combination, its use of a voting trust, or both.

The economy in the U.S. Upper Plains depends on agriculture and 80 percent of the grain leaving the region moves by rail. The letters describe how a potential CN-KCS combination and its proposed use of a voting trust would see reduced options for agricultural shippers in the Upper Midwest leaving them fewer direct competitive options, and eliminating the new network of shipping options a CP-KCS combination would create.

Excerpts from the letters written by agriculture industry associations representing hundreds of farmers, grain elevator operators, and other agribusinesses involved in grain, feed, fertilizer and farm supply products included:

“…CN would get stronger by absorbing KCS’s system, much of which is broadly parallel to CN’s existing U.S. network. This implies rationalization of assets, not investment in new competitive routes. And it implies a loss of competitive options – both concrete multi-railroad access to individual shippers and more subtle benefits of having multiple railroads near one another to serve as ‘geographically competitive’ options for transload shipments, grain moving to alternate elevators/terminals, build-ins and build-outs, and other means.” — North Dakota Grain Growers Association

“The costs of allowing a voting trust here, however are quite significant…First, from our perspective, the most significant cost associated with allowing CN to use a voting trust to complete its acquisition of KCS is the adverse impact that would have on existing competition between KCS and CN.” — Minnesota Grain & Feed Association

“Ultimately, we agree with the U.S. Department of Justice’s observation that ‘threats to competition would be present immediately after the CN voting trust is consummated.'” — South Dakota Grain & Feed Association

On Monday, June 21, CP submitted letters to the STB on behalf of concerned stakeholders across North America, bringing the total letters and statements expressing concern about CN or the use of a voting trust to more than 330. That includes shippers that could lose shipping options in the New Orleans to Baton Rouge corridor if CN’s voting trust is approved.

Public Comment Period for CN Voting Trust

In line with the public comment period for CN’s proposed voting trust, CP plans to file comments no later than June 28, explaining why the public interest costs of CN’s proposed voting trust outweigh the non-existent benefits. This public comment period, and the STB’s subsequent deliberations, will determine the course of competition for U.S. railroading and North American commerce for the next 150 years.

Now is the time for stakeholders to voice their concerns about whether CN should be able to lock in its anti-competitive plan to buy KCS via a voting trust. Stakeholders can express their concerns directly to the STB.

Importantly, 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.

As previously announced, CP is continuing 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.

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.

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

Source: Canadian Pacific Railway Limited