<article><p class="lead">Canadian Pacific (CP) and US railroad Kansas City Southern (KCS) expect to file their formal merger application with US rail regulators later this month, kicking off the process to create a single carrier stretching from Canada to Mexico.</p><p><a href="https://direct.argusmedia.com/newsandanalysis/article/2253297">KCS decided to merge with CP</a> last month, announcing on 12 September that it was canceling its $33.6bn agreement to combine with Canadian National (CN). </p><p>CP has requested a 10-month US regulatory review period for the transaction. If the review stays on track, CP and KCS may be able to finalize their merger by late 2022.</p><p>The US Surface Transportation Board‘s (STB) review of the merger application could take longer than 10 months. Class I railroad mergers are complex, and STB has not scrutinized a major merger proposal in 20 years. None of the five board members have been involved in a merger, though some staff members were involved in prior transactions.</p><p>STB general counsel Craig Keats has been with the agency since 1980 and has worked on many of the agency's highest-profile cases.</p><p>Opposition to the merger, as well as stakeholders' concerns about competition and other aspects of the deal, could further delay the proceeding.</p><p>US House of Representatives transportation committee chairman Peter DeFazio (D-Oregon) also has opposed the CP-KCS merger as well as any future combinations. This transaction and other potential combinations <a href="https://direct.argusmedia.com/newsandanalysis/article/2208808">could reduce competition, threaten jobs and potentially affect transportation</a>, DeFazio said in April.</p><p>STB board member Robert Primus has pushed for CP-KCS to be evaluated under newer, untested merger rules that became effective in 2001. CP and KCS are taking advantage of a waiver granted in the 2001 rules that allows any KCS merger to be reviewed under older merger rules.</p><p>"Past efforts to consolidate have been viewed as both necessary and disruptive to our national rail network," Primus said on 30 September. The CP-KCS should be reviewed under the newer rules that consider whether the transaction serves the public interest.</p><p>KCS chose CP's $31bn merger proposal after the STB rejected CN's voting trust application, saying it did not include enough public benefits. The trust would have allowed CN to own KCS while STB was reviewing their merger application.</p><p>STB reconfirmed its approval of CP's use of a voting trust on 30 September, saying that the modified terms of CP's second merger proposal would not affect the operations of the trust. STB approved the trust under older merger rules while CN's voting trust proposal was filed using newer merger rules that required the railroad to demonstrate there would be public benefits.</p><p class="bylines">By Abby Caplan</p></article>
