Canadian Pacific, Kansas City Southern Assert Right to Have Transaction Reviewed Under Waiver Granted to KCS in 2001

Canadian Pacific Railway Limited (TSX: CP) (NYSE: CP) ("CP") and Kansas City Southern (NYSE: KSU) ("KCS") today made a filing with the Surface Transportation Board (“STB”) asserting their right to have the STB review their combination under a waiver the STB granted to KCS in 2001. The filing was made in response to objections to the application of the KCS waiver that were filed with the STB by competitors and others.

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The STB granted KCS, the smallest of the Class 1 railways, an exemption from the new merger rules in 2001 because a combination involving KCS did not raise the same concerns that any transaction between the larger six Class 1s might create. CP and KCS explained in their filing that the logic under which the 2001 exemption was granted remains valid today. The combination would provide stronger competition against the larger Class 1s that grew through mergers under the old rules. The filing states that the only impact on competition will be that the transaction forces the other Class 1s to “face more of it.”

CP and KCS welcome a thorough and fair STB approval process for the planned creation of the first U.S.–Mexico–Canada rail network announced last month. Revoking the waiver would unnecessarily complicate and prolong the Board’s review.

CP and KCS noted in the filing that “[n]o party has raised any basis for concern with the merits of the transaction itself; rather, they merely seek to make the already-robust regulatory review process more time-consuming and burdensome.”

More than 375 shippers, ports, partners and customers have filed letters with the STB supporting the opportunity for a seamless, single-line route from Canada to Mexico. Supporters have asked for a swift and efficient process under the waiver to complete the transaction so the systems can be integrated, and the end-to-end benefits can be realized for the benefit of customers and all stakeholders.

Former STB Board Member William Clyburn, Jr. said in a statement to the STB: “I believe that the reasons for adopting the KCS waiver from the New Merger Rules are just as valid today as they were back then, especially as applied to the proposed CP/KCS transaction.”

Clyburn is uniquely positioned to provide this opinion because he cast the deciding vote in the Board’s decision to grant KCS a waiver from application of the New Merger Rules.

Former U.S. Senator Byron Dorgan (D-ND) said in a letter filed to the STB: “No party here has objected or raised a concern specific to this transaction between CP and KCS, the two smallest railroads in the industry that would remain the smallest railroad even after their combination. It would not reduce competition for any customer and it injects additional competition with new single-line services. So, there are benefits to be extracted from this particular merger.”