Four Class Is ask STB to apply more stringent review of CP-KCS merger

BNSF Railway Co., CN, Norfolk Southern Railway and Union Pacific Railroad are urging the Surface Transportation Board (STB) to apply more stringent standards in its review of Canadian Pacific's proposed acquisition of Kansas City Southern.

In filings last week, the four Class Is asked the federal regulatory board to apply its 2001 merger guidelines when reviewing the proposed CP-KCS transaction, even though KCS, as the smallest Class Is, received a waiver from those guidelines.

"The prior rules are antiquated, adopted over 40 years ago. The railroad industry has transformed itself since then, and the STB modernized its major merger guidelines in sync with those changes," NS stated in its filing. "KCS has similarly grown in size and stature since 2001. Winding back the clock to antiquated guidelines would deny the agency the suite of tools to gauge and address the broad implications of any major rail merger in the current economic and operational environment."

In its filing, BNSF stated that applying the older rules to the CP-KCS transaction would be "inappropriate."

The KCS waiver "was never appropriate, and even it had been appropriate when it was devised 20 years ago, it certainly is not appropriate for today's KCS and the proposed $29 billion transaction with CP," UP officials wrote in their filing.

"Waiving the board's current regulations would have a negative impact on the board's ability to adequately review the effects of the proposed transaction and to impose appropriate conditions, should conditions be required," stated CN officials in their filing with the STB.

Meanwhile, a fifth Class I, CSX, said in a filing that it supports the application of the older standards when the STB reviews the CP-KCS merger.

CP and KCS on March 21 announced they've entered a merger agreement in which CP would acquire KCS stock in a cash transaction worth $29 billion, including about $3.8 billion of outstanding debt. Upoin STB approval, CP would acquire control of KCS. The new railroad would be called Canadian Pacific Kansas City.