CP to seek declaratory order from STB on voting trust issue

Canadian Pacific announced today it will ask the Surface Transportation Board (STB) to issue a declaratory order confirming the viability of a voting trust structure that the railroad has called for as part of its proposed takeover of Norfolk Southern Corp.

CP called on NS to assist "constructively in this effort," but will proceed regardless of its cooperation.

"While we remain fully confident in our comprehensive regulatory plan, shareholders of both CP and NS have recommended that we seek this declaratory order as a means to better understand the STB's views on the proposed voting trust model ahead of any formal application," said CP Chief Executive Officer E. Hunter Harrison in a press release. "We still think this action is unnecessary; however, we believe listening to the shareholders — the owners of our respective companies — is important."

Voting trusts have been used in 144 transactions overseen by the STB since the rail industry was deregulated in the 1980, CP officials said. Although the declaratory order represents a hypothetical proposed trust, CP officials hope that the STB will offer "clear guidance that will satisfy shareholders' concerns before their voices are heard on CP's pending resolution."

Earlier this month, CP submitted a resolution to NS shareholders to ask the NS board to meet with CP to discuss the CP's merger proposal. CP has made three acquisition offers to NS, which has rejected those offers.

"NS has cited supposed regulatory uncertainty regarding the voting trust model as a reason not to talk to CP, and NS proposed that we seek a declaratory order," Harrison said. "We are skeptical that the STB will give a definitive ruling, especially when NS will not even sit down with us, but we are willing to go the extra mile if that is what it takes to get NS to the table."