The Board Accepts for Consideration the Application Filed in CP/KCS Merger Proceeding

On November 23, 2021, the Board issued a decision accepting for consideration the application filed on October 29, 2021 in Docket No. FD 36500, regarding a potential merger between Kansas City Southern and Canadian Pacific.  Canadian Pac. Ry. Ltd.—Control—Kansas City S., FD 36500 (STB served Nov. 23, 2021).  

On March 23, 2021, Canadian Pacific Railway Limited (Canadian Pacific), Canadian Pacific Railway Company, and their U.S. rail carrier subsidiaries (collectively, CP), and Kansas City Southern and its U.S. rail carrier subsidiaries (collectively, KCS), notified the Board of CP and KCS’s 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, of Kansas City Southern.  Canadian Pac. Ry. Ltd.—Control—Kansas City S., FD 36500 (filed Mar. 23, 2021).  The applicants stated that they were also seeking authority for the acquisition of control by Canadian Pacific, through Kansas City Southern, of The Kansas City Southern Railway Company (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.  The applicants noted that Canadian Pacific and Kansas City Southern entered into an Agreement and Plan of Merger on March 21, 2021.  Id. at 2.

The Board issued a decision on April 21, 2021, finding that the proposed transaction is a “major” transaction under 49 C.F.R. § 1180.2(a).  Canadian Pac. Ry. Ltd.—Control—Kansas City S., FD 36500 (STB served Apr. 21, 2021).  On April 23, 2021, the Board issued a decision, finding the transaction to be subject to the regulations set forth at 49 C.F.R. Part 1180 Subpart A, in effect before July 11, 2001, pursuant to the waiver for transactions involving KCSR and another Class I railroad, under 40 C.F.R. § 1180.0(b).  Canadian Pac. Ry. Ltd.—Control—Kansas City S., FD 36500 (STB served April 23, 2021).  Additionally, on May 6, 2021, the Board issued a decision, finding that the proposed voting trust arrangement is acceptable, with certain modifications.  Canadian Pac. Ry. Ltd.—Control—Kansas City S., FD 36500 (STB served May 6, 2021).

KCS filed a letter on May 21, 2021 in Docket Nos. FD 36500 and FD 36514, stating that “KCS has terminated the CP merger agreement and entered into a merger agreement with [Canadian National (CN)].”  Canadian Nat’l Ry. Co.—Control—Kansas City S., FD 36514 at 1 (filed May 21, 2021).  KCS noted that it was withdrawing as a co-applicant in the FD 36500 proceeding but, to the extent the proceeding continued, KCS intended to remain a party of record.  Id.  On May 21, 2021, CP filed a letter in Docket No. FD 36500, stating that “CP intends to proceed to prepare and file its [a]pplication.”  Canadian Pac. Ry. Ltd.—Control—Kansas City S., FD 36500 at 1 (filed May 21, 2021).  The Board later rejected CN and KCS’s joint motion for approval of a voting trust agreement, and CN filed a letter on September 16, 2021, informing the Board that the merger agreement between CN and KCS had been terminated by KCS.  See Canadian Nat’l Ry. Co.—Control—Kansas City S., FD 36514 (STB served Oct. 20, 2021). 

On September 15, 2021, CP and KCS filed an amended notice in Docket No. 36500 regarding their plan to file an application seeking authority for the acquisition of control by CP of KCS.  Canadian Pac. Ry. Ltd.—Control—Kansas City S., FD 36500 (filed Sept. 15, 2021).  The parties stated that KCS had terminated its merger agreement with CN on September 15, 2021, and on the same day executed a merger agreement with CP.  Thus, the KCS applicants were “rejoining CP as co-applicants and will proceed jointly to apply for Board approval for the proposed combination.”  Id. at 2.  The parties noted that their September 15 merger agreement “contemplates the same transaction on terms identical in nearly every respect to those set forth in the [March 21, 2021] Merger Agreement.”  Id. at 3.  On October 29, 2021, CP and KCS filed an application (the Application), “seek[ing] Board approval for the proposed combination of CP and KCS, pursuant to which CP would acquire and exercise control of KCS.”  Canadian Pac. Ry. Ltd.—Control—Kansas City S., FD 36500 at 1 (filed Oct. 29, 2021). 

On November 19, 2021, Union Pacific Railroad Company (UP) filed a petition to reject the Application as incomplete.  UP claimed that “the Application does not include all the information needed to satisfy the market analyses and operational data requirements under 49 C.F.R. §§ 1180.7 & 1180.8.”  See Canadian Pac. Ry. Ltd.—Control—Kansas City S., FD 36500, slip op. at 9 (STB served Nov. 23, 2021). 

In its decision served on November 23, 2021, the Board accepted for consideration the Application.  The Board found that “the Application is complete as it contains all information required by the Board’s regulations.”  Id., slip op. at 1.  Additionally, the Board rejected UP’s petition, finding that UP’s arguments did not provide a basis for rejecting the Application as incomplete.  Id., slip op. at 9-10. 

The Board adopted a procedural schedule for consideration of the Application.  See id., slip op. at 17-18.  Under the procedural schedule, comments, protests, requests for conditions, any other evidence and argument in opposition to the Application, and responsive, including inconsistent, applications are due on February 28, 2022.  Id., slip op. at 17.

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