Canadian National has apparently outbid Canadian Pacific in their competing attempts to acquire Kansas City Southern, stirring shipper concerns.
The drama began when the management of KCS chose to accept a $29 billion offer from CP. After that, CN countered with an unsolicited offer totaling $33 billion.
Last April, the Surface Transportation Board permitted the CP-KCS transaction approval process to proceed under merger rules that were in place prior to 2001, the year the STB adopted what are now called “the new rules”. (AA, 5-15-21, P. 5).
The Freight Rail Customer Alliance told the board the CN-KCS bid should be reviewed under the new rules because of serious competitive issues it raises.
The CP-KCS combination would merge the two smallest Class I railroads, in the end creating what would still be the smallest Class I railroad. By contrast, the merger of CN and KCS would create the fifth largest Class I railroad in North America.
FCRA asserted that CN’s overriding commitment to Precision Scheduled Railroading is likely to translate into service deterioration for shippers, particularly those who are considered captive.The shipper coalition, joined by the National Coal Transportation Association and Private Railcar Food and Beverage Association, added, “CN’s PSR-related dedication to reducing its already low operating ratio means that CN will act to minimize the extent to which shippers will share in the efficiencies that CN achieves through its merger.” American Chemistry Council President Chris Jahn also urged the STB to adopt safeguards to shore up rail competition, or “any merger could have a negative impact on manufacturing in the U.S., and the broader economy.”