It seems the rivalry between Canada’s two major railways is not yet over. Canadian Pacific Railway Limited (TSX: CP) responded on Thursday to CN (TSX: CNR) regarding the latter’s intention to file a responsive application for the “Springfield Line” with the Surface Transportation Board.
“CN’s proposal is built on a series of factual errors or misstatements,” starts the company statement.
The issue is rooted in Kansas City Southern (NYSE: KSU) backing out of its original merger plans with CN and pursuing a deal with CP instead. CN is set to receive $1.4 billion after the failed merger.
On Wednesday, CN announced its intent to request the regulatory board “to condition any approval of a CP-KCS merger on the divestiture” to CN of what it refers to as the Springfield Line. The company described the line owned by KCS as running from Kansas City, Missouri to Springfield and East St. Louis, Illinois. It also said this line is a direct alternative to CP’s own line from Kansas City to Chicago; hence, the merger would have no plans to invest on a parallel line.
In its response, CP clarified that the Springfield Line is not parallel to CP’s own line. It further said that the line “does not reach Chicago” and “is not part of a through route to Chicago in conjunction with CN,” contradicting CN’s previous announcement.
“In fact, there is no direct connection between KCS and CN today at Springfield, and historic interchange volumes reflect the absence of any actual service here,” the Canadian railway added.
CP said it plans to grow the said railway lines as part of the merger with KCS, asserting that it does not plan to downgrade any lines nor re-route traffic away from these lines–setting what could be a potential conflict for STB to adjudicate.
CN made the notice of intent for its proposal as part of the regulatory board’s review of the pending CP-KCS merger. On the other hand, CP made it clear that it will respond to CN’s request for conditions at the appropriate time.
Canadian Pacific Railway last traded at $96.46 on the TSX.
Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.