Saw that article. Total garbage.
https://www.railwayage.com/regulatory/cn-kcs-voting-trust-approval-better-than-even/
Looks like CN may actually get the voting trust.
CMStPnP wasd CN has a lot of support for their merger, much more than CP. I think the CN merger is a shoo-in. I would be surprised if it wasn't approved. Well first the letters of support are just for a larger merged railroad they are not for a specific preference of CN vs CP. Second the letters of support mean nothing to government regulators. They have to decide which merger is better for competition and the country as a whole as it relates to interstate commerce. CP is correct in it's position that between CP and CN, CP is the better choice as it harms competition less than the CN merger does. How the government will rule is still up in the air and it could go either way but I trust government enough to ignore the PR campaign which is intended to pressure the decision in CN's favor. Railway Age tends to be more of a cheer leader than objective reporting source with railway mergers or for that matter most issues railway related. They rarely take critical positions on any railroad unless it is a non-private entity like Amtrak or a public Transit organization.
wasd CN has a lot of support for their merger, much more than CP. I think the CN merger is a shoo-in. I would be surprised if it wasn't approved.
Well first the letters of support are just for a larger merged railroad they are not for a specific preference of CN vs CP. Second the letters of support mean nothing to government regulators. They have to decide which merger is better for competition and the country as a whole as it relates to interstate commerce.
CP is correct in it's position that between CP and CN, CP is the better choice as it harms competition less than the CN merger does. How the government will rule is still up in the air and it could go either way but I trust government enough to ignore the PR campaign which is intended to pressure the decision in CN's favor.
Railway Age tends to be more of a cheer leader than objective reporting source with railway mergers or for that matter most issues railway related. They rarely take critical positions on any railroad unless it is a non-private entity like Amtrak or a public Transit organization.
Totally agree with this - CP was the better overall fit. What makes the CP-KCS merger most attractive is that it was possible that it could have happened without imploding the NA rail market into the 'final stage of consolidations' (that Trains has been chortling about as being inevitable for the past 2 decades). CN-KCS will almost undoubtebly do just that. And I don't know that the STB wants that to happen.
If I had to give the CN-KCS odds of actually happening, I'd wager them at sub-fifty percent. The chain of events that they would certainly trigger are probably undesirable amidst a recovering global economy - the last thing the STB wants to see are massive line abandonments when jobs are scarce enough in the industry as-is.
ccltrains Several years ago KCS disposed of their investment company. Do not remember the name of the investment company but KCS with the investment company's stock was in the $150 range. After the disposal of the investment company the KCS stock which only covered the railroad was $5.00 per share and did not pay a dividend. Being retired I am looking for income and passed on buying KCS. Hindsite always is 20/20 and now I am kicking myself for not buying a couple hundred shares when it was $5.00.
Several years ago KCS disposed of their investment company. Do not remember the name of the investment company but KCS with the investment company's stock was in the $150 range. After the disposal of the investment company the KCS stock which only covered the railroad was $5.00 per share and did not pay a dividend. Being retired I am looking for income and passed on buying KCS. Hindsite always is 20/20 and now I am kicking myself for not buying a couple hundred shares when it was $5.00.
Who knows, fortunes change, maybe in a year or two you'll be thankful that you passed on KCS.
The Big 4 US Class 1 railroads haven't really commented on either the CP or CN merger proposal because neither railway has filed their actual merger proposal yet. Both gave preliminary notice to the STB, got permission to look at KCS actual financial information under protective conditions, and requested permission to ultilize a Voting Trust prior to actual permission to acquire KCS. Each of the US Class 1 railroads sent notice to the STB that they do intend to comment when the actual request for permission to merge/acquire is filed. CP has said that they would file their request for permission to acquire KCS in late June of this year. CN having started later has announced that they would file their request sometime in August of this year.
[quote user="richard4472"]
NO, both CP and CN are private companies. CN was a Crown corporation up to 1995 or so. Both are transcontienatl railroads in Canada. CP would be attractive to UP or BNSF a sit would provide rail links to an Atlantic port, that is Saint John New Brunswick
[/quote]
Not really anexpert r really knowledgible on this merger , BUT a coupe of thongs seenm to spring to the forefront in my mind: Neither UPRR or BNSF hAVE HAD A LOT TO SAY IN THIS ONE. They seem tio currently be treating it as a fight between a couple of neighborhood high schoolers, IMHO.
Even NS and CSX seem to be sitting back, like buzzards circling a wounded road kill . Every oner waiting for the US Government to step-in, like the piccadores in a ,bull fight, and finish off,either one of the 'combatants' >(?).
IMHO, THAT, is really when, the Buzzards will come in to pick their meal. In the meanwhle, specuation, is the hor d' oeuvre for bystanders.
wasdCN has a lot of support for their merger, much more than CP. I think the CN merger is a shoo-in. I would be surprised if it wasn't approved.
wasd https://www.railwayage.com/freight/class-i/cn-kcs-1400-supporters-and-counting/ CN has a lot of support for their merger, much more than CP. I think the CN merger is a shoo-in. I would be surprised if it wasn't approved.
https://www.railwayage.com/freight/class-i/cn-kcs-1400-supporters-and-counting/
CN has a lot of support for their merger, much more than CP. I think the CN merger is a shoo-in. I would be surprised if it wasn't approved.
I don't know about that. The STB chairman is not keen on any mergers..and isn't CN suing the STB on another matter? Doesn't sound too promising to me.
No, I believe both were at one time but not for many decades.
DAVID REESEThe KCS does not have access to any industry in Houston only trackage rights between Beaumont through Houston to a connection with the line they purchased between Victoria and Rosenberg. At least that is my understanding.
True but they do have refinery access in Beaumont,TX, Lake Charles, LA, and Port Arthur, TX. If your speaking to refinery access and CP Oil train contracts. I am not sure about what the pipeline access is into Houston but they might not need direct rail access to Houston refineries, they might just need to get close.
The KCS does not have access to any industry in Houston only trackage rights between Beaumont through Houston to a connection with the line they purchased between Victoria and Rosenberg. At least that is my understanding.
Not following this thread carefully, so I apologize if this is a duplicate post, but here is the 'official' CN account of the May 21st agreement.
https://www.connectedcontinent.com/assets/uploads/pdf/Superior-Proposal-to-Combine-With-Kansas-City-Southern.pdf
kgbw49By comparison Berkshire Hathaway "made it's money back" after about 9 years from the date of the purchase of BNSF.
I got their class B stock, UP and now CP. I suspect if they cannot get line concessions CP is going to work out some deal with UP. Not a merger, but something similar to what NS worked out with KCS on the Meridian to Dallas line. Hence I am waiting for the other shoe to drop on this. NYSE has very positively responded to the CP negotiating position but I am not sure what NYSE is expecting as a final outcome.
CP is more clever than most here give it credit for. I was extremely impressed with it's efficiency and signal improvements with the former Milwaukee Road as well as the diligence on how it handles Amtrak trains with on time schedules. To me that excudes high competence. I still do not know how Soo Line won the bidding war for Milwaukee with the lower offer but somehow it did and so there is precedence here as well.
https://www.railwayage.com/regulatory/cn-kcs-file-for-stb-voting-trust-approval/
CN and KCS are filing a proper application for their voting trust.
If CN is indeed able to acquire KCS, I think CP should fire Keith Creel for basically setting in motion the events that greatly weakened their competitive position. They could terminate his contract and pay the severance with part of the $700 million they received from CN.
CN will sell Baton Rouge-New Orleans line as part of merger application.
link to article.
beaulieu, thanks for laying out all the permutations so clearly. Much appreciated!
kgbw49 beaulieu, that is very interesting! It is clear from your post that KCS has done a good job protecting itself. it would seem if it does not walk away from CN it would get the $1.7 billion, which in turn would allow it to pay CN the $700 million and net the &1 billion.
beaulieu, that is very interesting! It is clear from your post that KCS has done a good job protecting itself. it would seem if it does not walk away from CN it would get the $1.7 billion, which in turn would allow it to pay CN the $700 million and net the &1 billion.
I am not sure that you understand the money situation exactly.
If the Voting Trust is denied. CN owes KCS $1 billion and can choose to walk away forfeiting the $700 million advance too.
If the Voting Trust is denied KCS can walk away keeping CN's $1 billion, but must refund the $700 million leaving KCS with a net of $300 million.
If the Voting Trust is denied but neither CN nor KCS walks away, KCS shareholders keep the $1 billion as a sweetener.
If the Voting Trust is denied but the deal goes through KCS shareholders will get approx. $30.3 billion in cash and CN stock and CN will assume $3.7 billion in KCS debt, remember the $700 million was an advance that KCS has already received and forwarded to CP so that has already been paid.
If the Voting Trust is denied and then the deal is denied then KCS shareholders will keep the $1 billion cash from CN and will not have to repay the $700 million.
Dividing KCS might be considered but there isn't a bidding war like NS and CSX for all of Conrail. The two bidders decided enough is enough and agreed to the division of Conrail. That isn't happening over KCS.
On the other side of the coin, I am now wondering if KCS doesn't turn out to be worth more if it is "parted out"?
Probably not given the huge premiums both Canadian roads are willing to pay, but one could see four distinct parts of KCS going to two, three or four differenr Class I railroads, in theory at least.
One additional point. If the STB denies the Voting Trust for CN, then CN is required by its agreement with KCS to either sweeten the deal by another $1 billion or walk away forfeiting $1.7 billion USD. KCS can choose to walk away if the Voting Trust is not approved, but it must refund the $700 million advance that was paid to CP and will not get the $1 billion additional from CN.
One guess to preserve and enhance competition as required by the new STB rules is KCS from KC to Shreveport to New Orleans would be acquired and run by another railroad. That would probably be one of many conditions the STB would set.
CN without a good Chicago-KC route makes KCS between KC and Shreveport kind of redundant perhaps? Will there be abandonments?
kgbw49Oh, you bet they would! Agree 100%. I just threw some thoughts out there for conversation purposes. I do think the permutations are almost endless. I still can't figure out offering $29 billion or $33 billion for a property that earned just $627 million net income in its best year of 2018. Even if there really is $1 billion annually of synergies aNS that all drops to the bottom line, you still won't get your money back for 29 years or 33 years. By comparison BNSF "made it's money back" after about 9 years.
Also, I believe there is some past history as well with Mexico. Southern Pacific de Mexico didn't do so well and SP hung unto the property long after it was obvious it was losing money. Did SP get their moneys worth in the sale to the Mexican government? I doubt it. Political winds can change in Mexico as well in regards to profitability of the property.
kgbw49 That is a lot of risk for both $29 billion and $33 billion.
That is a lot of risk for both $29 billion and $33 billion.
At least CP's offer was more stock and less cash (debt). Plus if the CP deal would end up being successful, CN will have contributed $700 million of the cash.
Perhaps they expect the KCS purchase to drive disproportionately large earnings growth over the next five to ten years. In any case CN has some work to do to get its earnings growth back on track.. its been in a bit of slump compared to CP which has for the most part had healthy earnings growth over the past decade.
The whole thing looks very risky to me.. i.e. a good portion of the year's earnings could go up in smoke if the deal is nixed for any reason.. and that's just the entree. Oh well.. I would be happy to be proven wrong.. maybe this is a bold move which will somehow pan out..
Yes, but the incremental gain still takes 33 years to earn back the initial investment.
That $1 billion if it all drops to the bottom line is a paltry 3% return on investment. Probably not enough to cover the interest expense on the debt. That is why it is so curious. There must be something else, right? One has to hope so!
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