North America - Keith Creel, chief executive officer of Canadian Pacific Railway Ltd., reaffirmed his US$27.2 billion offer for KCS and said the U.S. carrier has until 12 Sep 2021 to accept the deal.
 
Mr. Creel urged KCS's board of directors to recommend the CP takeover to its shareholders, one day after the U.S. regulator issued a ruling that cast in doubt rival CN's richer deal to buy KCS.
 
"The deadline's the deadline. We're not going to change the leverage. We're not going to change the offer. It's firm," Mr. Creel said on a conference call with analysts and investors on Wednesday.
 
CP gained a boost in the back-and-forth battle for the Missouri-based railway on Tuesday, when the U.S. Surface Transportation Board turned down CN's application to form a voting trust with which to hold KCS shares while awaiting an STB ruling on the takeover itself.
 
Analysts said the rejection could spur CN to drop its bid and make CP the likely victor.
 
KCS confirmed it received CP's offer on Wednesday and said it would respond after evaluating it.
 
KCS cancelled a 3 Sep 2021 shareholder vote on the CN offer.
 
The two sides had agreed on a takeover worth US$29.8 billion.
 
That deal ended an agreement CP and KCS made in March worth US$25.2 billion.
 
"We all have deal fatigue. My goodness, this has been going on for so long. We're ready to go to work. It's time to get on with this," Mr. Creel said.
 
In separate statements, CN and KCS said they are "disappointed" by the STB decision and are "evaluating" their options."
 
"We remain confident that our pro-competitive, end-to-end combination, is in the public interest and that it would offer unparalleled opportunities and benefits for customers, employees, the environment, and the North American economy," CN said.
 
Mr. Creel said he is confident the CP takeover of KCS will win approval from the STB, and noted the voting trust has already received the go-ahead.
 
"It is an end-to-end merger whereas the CN deal overlaps," Mr. Creel said, adding the takeover would form a network that links Canada, the United States, and Mexico and benefit shippers, the rail industry, and the economy.
 
The STB rejected CN's application to form its voting trust, saying the railway failed to prove it was in the public interest, and citing concerns from shippers about threats to service and competition.
 
The approval of the CN voting trust, an independent entity that holds a company's shares pending its takeover, was the first major hurdle CN and KCS had to clear before applying to the STB for the okay of the merger itself.
 
Analysts said CN's options include raising its offer to ensure KCS shareholder support during the lengthy takeover approval process, appealing the STB decision to the U.S. Appeals Court, or walking away.
 
David Meyer, a lawyer for CP, said CN had no realistic prospect of winning an appeal of the STB's unanimous rejection.
 
"The decision was a pretty powerful decision, well-reasoned, and thorough. I don't think that there is any realistic prospect of the court of appeal second-guessing the board's judgment in this area," Mr. Meyer said.
 
Mathieu Gaudrault, a CN spokesman, said CEO Jean-Jacques Ruest was not available for an interview.
 
CN's failure to win approval for its voting trust spurred an activist to call for the resignations of Mr. Ruest and chairman Robert Pace.
 
Christopher Hohn, whose TCI Fund Management Ltd. owns more than 5 percent of CN and 8 percent of CP, urged the CN board to replace Mr. Ruest with Jim Vena, former operating chief at CN and Union Pacific.
 
Gilbert Lamphere, a former Illinois Central Railroad chairman, and director at CN and CSX Corp., should be added to the board of directors, Mr. Hohn said.
 
TCI said CN's financial results have lagged those of its peers under the current management team, and said pursuing KCS was a waste of shareholders' money, especially without a voting trust in place.
 
"The CN board has consistently misjudged the STB and the predictions of the board have been consistently wrong. As a result the board now lacks all credibility and so the chairman and CEO should resign," Mr. Hohn said in a letter to CN's board of directors on Tuesday.
 
Anthony Hatch, an independent railway analyst with ABH Consulting in New York, said the chances are high TCI will succeed in upending CN's board or management because they likely have other major investors ready to back their fight.
 
"They always come with allies," Mr. Hatch said.
 
He pointed to three recent cases in which activist investors have won battles at railways, Mr. Hohn in 2008 successfully waged a fight for seats on the board at Florida based railway CSX, Paul Hilal's Mantle Ridge in 2017 won a campaign to have Hunter Harrison hired as CEO at CSX, and William Ackman's Pershing Square Capital in 2012 took control of CP's board and put Mr. Harrison in charge.
 
However, Mr. Hatch cautioned the activist's push for improved financial performance would come at the expense of growth, and return Canadian railways to the cost-cutting days of years past.
 
Railways need to focus on technology, the customer, and expanding their businesses, he said.
 
"This is not the time to be looking at margins over growth," Mr. Hatch said.
 
Eric Atkins.