STB Reaffirms CP-KCS Voting Trust Agreement

The U.S. Surface Transportation Board last week voted to affirm an earlier decision approving a plan by Canadian Pacific to place Kansas City Southern stock into a voting trust while regulators consider a proposal to merge the two Class I railroads.

The Board earlier approved the voting trust plan on May 6. Although the STB voted on Sept. 30 to affirm that plan, member Robert Primus dissented.

The STB said “it is not a foregone conclusion that the [prior] approval remains effective where a merger agreement is terminated but later revived, in the instant situation, among other things, the voting trust described in the applicants’ amended notice is substantively identical to that approved by the Board on May 6, 2021, and the Board found that the modified financial terms of CP’s offer would not impact the operation of the voting trust. However, the Board retains continuing jurisdiction to order modifications and correct future problems that may come to its attention.”

Primus said he objects to the CP-KCS merger being considered under the Board’s pre-2001 rules, via a waiver that applies to KCS.

“The topic of railroad consolidation has long been a public concern,” he said. “Past efforts to consolidate have been viewed as both necessary and disruptive to our national rail network. In the 1990s, as the number of Class I’s quickly shrank, concern over consolidation grew. The Board’s resulting adoption of the current merger rules in 2001 was the appropriate response to this concern—in particular, its insistence that the public interest be a major component in the consideration of any voting trust and merger application. Now, 20 years later, the Board is once again front and center in the debate over consolidation and the future of the network. In the interest of the public good and for the well-being of the national rail network, any further consolidation of the Class I’s 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. For these reasons, I respectfully dissent.”

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