The Surface Transportation Board has affirmed its previous approval of a voting trust that Canadian Pacific would use as part of the process to acquire Kansas City Southern.
The board had first approved CP’s (NYSE: CP) proposed voting trust in May. But KCS (NYSE: KSU) opted instead to merge with CP rival CN (NYSE: CNI). However, the KCS-CN relationship soured after STB denied CN’s request to use a voting trust, which both CN and CP said would protect KCS shareholders during the merger process as well as prevent any premature takeover of KCS.
KCS and CP subsequently rekindled their merger aspirations, and CP resubmitted a modified voting trust, which STB affimed on Thursday. CP modified the voting trust amid CP’s revised offer to KCS, which was made in August.
The board’s decision is available here.
STB noted that CP requested to establish a procedural schedule in which there would be a 10-month period between CP’s filed application with the board to acquire KCS and the board’s actual decision. The board said it would solicit comments on a proposed procedural schedule in a separate decision.
STB’s affirmation of the voting trust wasn’t unanimous, with board member Robert Primus being the sole dissenter because he felt the board missed an opportunity to scrutinize the proposed merger under stricter, post-2001 merger rules.
“In the interest of the public good and for the well-being of the national rail network, any further consolidation of the Class Is should be subjected to the current merger rules which call for the board to consider whether the public interest is best served by a merger agreement’s proposed voting trust,” Primus said in a dissenting opinion. He was also the lone dissenter in the board’s decision to allow the CP-KCS merger to be considered under the older, pre-2001 merger rules.
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