Regulators reject key part of railroad deal tied to BR passenger rail  

Canadian National’s $33.6 billion deal to acquire Kansas City Southern railroad is in jeopardy after federal regulators rejected a key part of the plan today and opened the door for a competing $31 billion offer from Canadian Pacific Railway. 

The Surface Transportation Board said Canadian National won’t be able to use a voting trust to acquire Kansas City Southern and hold the railroad while the board reviews the overall deal. It wasn’t immediately clear whether Kansas City Southern would want to move forward with the deal without a voting trust that would allow shareholders to get paid before the board embarks on its lengthy review of the deal. Plus, Kansas City Southern is now free to accept CP’s offer, which already has regulatory approval to move forward. 

The decision is not entirely surprising, given that the Surface Transportation Board earlier this spring indicated it would take a cautious approach in approving CN’s acquisition plan, which has drawn opposition because of concerns about the merger hurting competition, specifically because both CN and KCS currently own lines running between Baton Rouge and New Orleans. 

That’s where Louisiana’s passenger rail opportunity comes in. CN says it can address the competition concerns through its operating plan and by selling 70 miles of track between New Orleans and Baton Rouge where KCS’s network directly overlaps with CN’s tracks. 

Left to be decided is who might buy the line if and when it becomes available, as previously reported by Daily Report. Still, Louisiana advocates of passenger rail between the state’s two largest cities say the deal is significant because it opens the doors to numerous possibilities. Now, though, the trajectory of the potential passenger rail is even more murky. Read more about the Kansas City Southern deal.