Montreal Quebec - CN and KCS today announced that they have taken the next step on their path to combine to create the premier railway for the 21st century.
 
CN and KCS today jointly filed with the Surface Transportation Board (STB) a renewed motion for approval of its voting trust that outlines the case for approval of the voting trust to advance the CN/KCS merger that will enhance competition, spur economic growth, and realize the benefits of a fully end-to-end transportation network across the continent.
 
The filing highlights that the voting trust protects against premature control of KCS and protects KCS' financial health, that CN remains financially sound, the substantial benefits to be gained from the transaction by customers, and the nearly 1,100 stakeholders who have already supported the transaction.
 
As part of the application, CN is committing to divesting KCS' 70 mile line between New Orleans and Baton Rouge, which is less than 0.7 percent of the approximately 27,000 route miles the two companies operate.
 
This commitment eliminates the sole area of overlap between the CN and KCS networks, thereby making the combination an end-to-end transaction.
 
This commitment, plus CN's multiple other pro-competitive commitments, including keeping existing gateways open on commercially reasonable terms, addresses any competitive concerns.
 
The Public Interest Benefits of a Combined CN/KCS Network
 
New single-line routes and commitment to keep gateways open for customers, a combined CN/KCS will reduce transit times and provide more reliable and timely service, with shorter equipment cycle times, making rail more competitive with truck and barge routes, and single-line services offered by other railroads.
 
It will also offer more cost effective access to Southern markets in the United States and Mexico, accelerating USMCA's economic benefits.
 
Specific supply chain benefits, the joint filing includes detailed maps illustrating benefits for six major market segments: (1) grain and grain byproducts, (2) intermodal, (3) importers, exporters, and ocean carriers who rely on ports, (4) automobiles and automotive parts, (5) lumber and panel customers, and (6) plastic resins, liquefied petroleum gases, and refined petroleum products.
 
Significant environmental benefits: Moving freight by rail instead of truck lowers greenhouse gas (GHG) emissions by up to 75 percent, on average.
 
A single freight train can remove more than 300 trucks from the road, leading to a significant reduction in GHG emissions.
 
For example, a daily CN/KCS double stack intermodal train from San Luis Potosi to Detroit would result in approximately 260,000 tons of CO2e emissions avoided per year.
 
Support across broad stakeholder network: CN has so far received well over 1,100 letters detailing the competitive benefits of the transaction including better service, more shipping options, and streamlined routing from shippers and customers as well as from local governments, trade associations, and business groups.
 
Support from ports and logistics providers demonstrates the significant multi-modal benefits.
 
CN Application Satisfies Every Aspect of Voting Trust Approval Framework
 
No unlawful control.
 
Under CN's proposed voting trust, KCS would maintain complete independence.
 
KCS will continue to be managed by its existing management and board of directors, with a trustee who is a former chief executive of KCS.
 
KCS will remain intact and preserve its ability to pursue its independent business objectives.
 
CN will have no influence over the day-to-day management or operation of KCS.
 
Public interest benefits.
 
Approval of the voting trust will provide the STB the opportunity to review the substantial public interest benefits of the CN/KCS combination while ensuring KCS shareholders receive the full value of their shares.
 
The CN/KCS combination will provide a safer, faster, cleaner, and stronger rail option for customers, port authorities, and communities.
 
As reflected by over 1,100 letters supporting the combination, it will result not only in better service, more shipping options, and streamlined routing, but also in substantial environmental benefits.
 
CN will remain financially strong.
 
The Verified Statement of CN's Chief Financial Officer, Ghislain Houle, included with the STB filing clearly demonstrates that the proposed transaction will not impair CN's strong financial standing, and sets forth CN's plan for rapidly paying down the debt it has secured to fund a portion of the KCS purchase.
 
CN has a strong record of investing in its network to provide safe service and is dedicated to applying that same approach to the combined CN/KCS network.
 
CN made its highest capital investments in 2018-2020 on record, which were focused on adding capacity to accommodate growth and resiliency, deploying technology to improve safety and productivity, and investing in rail cars and locomotives to serve our customers.
 
No risk to competition.
 
While the STB will have ample opportunity to review the competitive dynamics of the CN/KCS combination, CN's commitment to address the approximately 70 mile overlap with KCS in Louisiana indicates that the CN/KCS combination is a vertical, end-to-end merger.
 
An analysis by Bill Rennicke, a transportation executive and a consultant to railroads and motor carriers for more than 40 years, included with the filing addresses specific concerns about competition in Mississippi, finding that CN and KCS' North/South lines in Mississippi are generally many miles apart and do not serve a single customer in common in this area.
 
Preserves KCS' choice of superior partner.
 
Approving CN's proposed voting trust would ensure the realization of the public interest benefits of a CN/KCS partnership and allow KCS to continue to keep CN's superior proposal.
 
Author unknown.