CP Wants CN-KCS Reviewed Under Stricter Rules

It’s another week and another round of dueling statements from Canadian Pacific and Canadian National as they vye to buy Kansas City Southern.

In the latest development, CP has told the U.S. Surface Transportation Board that a CN-KCS combination should be reviewed under the board’s current merger rules pertaining to Class 1 railroad mergers.

However, CP had earlier urged regulators to consider its bid to buy KCS under the less stringent pre-2001 rules.

CP justified the contradiction by saying its acquisition of CP would be a true end-to-end merger whereas CN taking over KCS would have significant overlap that could led to less competition in certain areas.

For its part, CN wrote an open letter to “Kansas City Southern community” that explained while its offer is superior to that of CP.

In turn CP cited what it termed “mounting opposition” to the CN-KCS combination, saying the STB has received more than 110 letters in opposition to a CN takeover of KCS.

Also weighing in on the fight for KCS was Warren Buffett chairman of Berkshire-Hathaway, which owns BNSF.

Buffett suggested CP and CN may be overpaying to control KCS and that the merger would not gain either system much traffic growth.

“There’s no magic to the Kansas City Southern,” he said.

However, Buffet said he understood why the Canadian Class 1 systems are dueling for KCS. “I’m sure from the standpoint of both CP and CN, there’s only one K.C. Southern,” he said.

“They’re not going to get a chance to expand. They’re not going to buy us. They’re not going to buy the UP (Union Pacific). The juices flow, and the prices go up.”

“People are not going to remember what you paid, but they’re going to remember whether you built a larger system,” Buffett said.

BNSF will watch closely how the fight over KCS plays out, Buffet said.

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