North America - They might be three of the most powerful words around, I was right.
 
Canadian Pacific Railway CEO Keith Creel didn't utter the phrase Wednesday morning in his comments about the takeover scrap for Kansas City Southern (KCS), but he really didn't need to say it.
 
Last spring, when rival CN topped his own company's friendly bid for KCS, Creel said only CP's offer could get through the U.S. regulatory process and was achievable.
 
CN's higher bid wasn't, he countered, suggesting it was the equivalent of "fantasy money" because it was unattainable.
 
On Tuesday, his view was validated, at least for now.
 
The U.S. Surface Transportation Board unanimously rejected CN's use of a voting trust in connection with its takeover deal for KCS, re-shaping the landscape in the corporate tug-of-war.
 
Speaking to analysts Wednesday, Creel said CP's follow-up offer for the U.S. railway made last month still stands and will expire 12 Sep 2021.
 
The merits of a union between the two smallest Class 1 railways in Canada and the United States also hold.
 
"It confirms what we've always believed to be true. We have always said for value to be realized, it must be achievable, it can't be illusory. We have deal certainty," Creel said.
 
Industry analysts say the latest turn of events has catapulted Calgary-based CP back ahead in this contest.
 
"We expect they are in the driver's seat to be able to merge with KCS," Stifel analyst Benjamin Nolan said Wednesday.
 
"It increases the likelihood the KCS board turns around and deems CP's proposal as superior, on the basis of the CN proposal being too risky to get done," added analyst Matthew Young of Morningstar.
 
The clash over KCS has been a mighty corporate struggle between Canada's two railways, with CP initially announcing in March a US$25 billion merger for KCS, valuing the U.S. company at $275 a share.
 
The deal would extend CP's north-south network into Mexico, where it would connect to five ports and strengthen its railway ties, and customers' access, to the region.
 
The merged company, with a network of 32,000 kilometres of rail, would keep its corporate headquarters in Calgary and have almost 20,000 employees.
 
However, the offer was topped by a $325-a-share bid from CN in April, valued at $30 billion.
 
At the time, CP's boss said the larger figure was eye-popping, but countered that "unrealized value is still equal to zero."
 
He noted there was no duplicative overlap between CP and the KCS network, unlike CN's competing bid.
 
The board of KCS later backed the higher offer from Montreal-based CN.
 
The struggle led to this week's pivotal ruling from the STB on CN's request to establish an independent voting trust.
 
Such a trust would hold the shares of the U.S. railway until all regulatory approvals are in place, while allowing investors to get paid, CP's request for a voting trust had previously been approved.
 
"The board finds that the proposed use of a voting trust would not be consistent with the public interest," the new STB ruling stated.
 
The applicants failed to establish "use of a voting trust would have public benefits, and the board finds that using a voting trust, would give rise to potential public interest harms relating to both competition and divestiture."
 
Tuesday's ruling has shifted the playing field, but will CN and KCS dig in for a fight, or give up on their transaction?
 
CN said it was disappointed by the ruling and "evaluating the options available to us."
 
On Wednesday, KCS said it was working with CN to consider its options, and acknowledged receiving the unsolicited bid from CP.
 
The terms are identical to its offer last month, which CP valued at about $300 a share.
 
The U.S. railway said it will also adjourn a shareholders' meeting to vote on the CN deal that was slated for Friday.
 
Creel noted Wednesday CP's current bid has a 12 Sep 2021 deadline and the company is not going to change its offer.
 
"Our appetite and willingness to keep that offer on the table forever does not exist," he added.
 
"The other undeniable fact is we all have deal fatigue."
 
Anthony Hatch, an independent New York-based transportation analyst with ABH Consulting, said tough language in the STB ruling suggests it's unlikely CN would try to proceed without a voting trust, given the potential regulatory risks it could face.
 
CN would also have to get takeover approval based on stricter U.S. rules put in place in 2001 that require any rail merger to enhance competition.
 
"I think that means it's the end of that story. If I was CN, it's probably not worth continuing to fight," Hatch said.
 
As well, TCI Fund Management, which owns more than five percent of CN's stock, issued a letter Tuesday calling on the railway's board to immediately withdraw from its agreement to buy KCS, saying "proceeding without a voting trust would be reckless, irresponsible, and massively value destructive."
 
In a note, analyst Steven Hansen of Raymond James said CN could ask the STB to re-evaluate its ruling, or try to appeal the decision, but he expects CN would "have to come back and really entice KCS shareholders to stick around for any appeal process, which likely entertains another sizeable sweetener."
 
While the battle isn't over yet, Hatch believes CP has made a solid case from an underdog position, given that it is competing with its larger Canadian rival for KCS.
 
"CP did a good job of emphasizing the political aspects, the time risk, the voting trust, and the deal risk, and they have been validated. They played the hand that they were dealt really well," Hatch said.
 
Chris Varcoe.