CP & KCS Notify the Surface Transportation Board of Intent to File Application for Approval of Control Transaction

On March 23, 2021, Canadian Pacific Railway Limited (Canadian Pacific), Canadian Pacific Railway Company, and their U.S. rail carrier subsidiaries, Soo Line Railroad Company, Central Maine & Quebec Railway US Inc., Dakota, Minnesota & Eastern Railroad Corporation, and Delaware & Hudson Railway Company, Inc. (collectively, CP), and Kansas City Southern and its U.S. rail carrier subsidiaries, The Kansas City Southern Railway Company (KCSR), Gateway Eastern Railway Company, and The Texas Mexican Railway Company (collectively, KCS), notified the Surface Transportation Board (Board) of CP and KCS’s (collectively, Applicants) intent to file an application seeking authority under 49 U.S.C. §§ 11323-25 for the acquisition of control by Canadian Pacific, through its indirect, wholly owned subsidiary, Cygnus Merger Sub 2 Corporation (Cygnus Merger Sub 2), of Kansas City Southern.  Canadian Pac. Ry. Ltd.—Control—Kansas City S., FD No. 36500 (filed Mar. 23, 2021).  Applicants are also seeking authority for the acquisition of control by Canadian Pacific, through Kansas City Southern, of KCSR and its railroad affiliates, and for the resulting common control by Canadian Pacific of both its U.S. railroad subsidiaries and KCSR and its railroad affiliates.  Id. at 1.  Applicants intend to file the application on or after June 28, 2021.  Id.

Canadian Pacific and Kansas City Southern entered into an Agreement and Plan of Merger (Merger Agreement) on March 21, 2021.  Id. at 2.  Pursuant to the Merger Agreement, Canadian Pacific, through its subsidiary, Cygnus Merger Sub 2, will acquire all of the capital stock of Kansas City Southern.  Id.  Specifically, Cygnus Merger Sub 2 will merge with and into Kansas City Southern, with Kansas City Southern surviving the merger.  Id.


Upon completion of the merger, Canadian Pacific proposes to conduct a series of internal transactions resulting in its voting interest in the successor to Kansas City Southern being placed into an independent voting trust.  Id. at 2-3.  Should the Board approve the application, the voting trust would be terminated, and Canadian Pacific would assume control of Cygnus Merger Sub 2 and, through it, of Kansas City Southern and its railroad affiliates.  Id. at 3.

In their notice, Applicants stated that the transaction is a “major” transaction, as defined at 49 C.F.R. § 1180.2(a), because it is a control transaction that involves two or more Class I railroads.  Id.  Applicants also stated that the application is “subject to the regulations set forth at 49 CFR Part 1180 (2000), pursuant to the waiver granted by the Board for transactions involving KCSR.”  Id. at 3-4.  Under 49 C.F.R. § 1180.0(b), the Board “will waive application of the regulations contained in [Part 1180, subpart A] for a consolidation involving [KCSR] and another Class I railroad and instead will apply the regulations in [] subpart A in effect before July 11, 2001 . . . unless [the Board is] shown why such a waiver should not be allowed.”

Applicants further stated that the transaction will “generate substantial public benefits by combining the Nation’s two smallest Class I railroads,” and will enhance competition against other Class I railroads and trucking competitors.  Id. at 4.  The transaction would also “create the first rail network connecting the U.S., Canada, and Mexico.”  Id.

In a press release issued on March 23, 2021, the Board noted that this proposed transaction would be the first “major” transaction to seek Board approval in over two decades.  Numerous parties, including railroads and shippers, have submitted filings to the Board in support of and in opposition to the transaction.  Multiple parties have specifically objected to the waiver for KCSR.  The Board issued a decision on April 5, 2021, stating that replies to the objections to the waiver are due on April 12, 2021.  Canadian Pac. Ry. Ltd.—Control—Kansas City S., FD No. 36500 (STB served April 5, 2021).


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