Railway operator KCS postpones merger vote as it awaits US regulatory approval

Railway operator Kansas City Southern (KCS) said Thursday that its stockholders will vote next month on the US$33.7bn merger proposal from Canadian National Railway (CN) as it awaits regulatory approval.

A special stockholders’ meeting scheduled for Tuesday was postponed because US railway competition regulator, the Surface Transportation Board (STB), has not yet approved the transaction. STB said last week that it expects to make a decision by the end of this month and KCS has scheduled the new stockholders’ vote for September 3.

If approved, the deal would form the first US-Mexico-Canada rail corridor as the US operator has a rail network in Mexico.

KCS and CN unveiled their definitive merger agreement in May, where the latter is buying the former through stock and cash. KCS’s international operations also include Panama.

KCS has another offer on the table worth US$31bn from Canadian Pacific Railway (CP), which was presented on August 10 to improve an original US$25bn offer from February.

On August 12, KCS’s board determined that CP’s improved offer was inferior to that of its Canadian rival. 

CN came out with a statement the same day saying: “Together, CN and KCS would create the premier railway for the 21^st century, connecting ports in the United States, Mexico and Canada to expand North American trade and power economic prosperity.”

CP claims the KCS-CN deal would have a negative impact on the competitive landscape and it has also accused CN of attempting to undermine its potential deal with the Kansas-based company. 

“The CN proposal would create the third-largest class 1 railroad and destabilize the competitive balance in the North American rail industry,” it said in a statement earlier this year.

KCS has downplayed the competition issue and said it is confident STB will give green light for the deal, which is also subject to regulatory approval in Mexico.