Canadian Pacific to seek declaratory order from U.S. Surface Transportation Board
CALGARY, Feb. 16, 2016 /CNW/ – Canadian Pacific (TSX:CP) (NYSE:CP) today announced it will seek a declaratory order from the U.S. Surface Transportation Board (STB) confirming the viability of the voting trust structure that CP has suggested as part of its proposed merger with Norfolk Southern Corp. (NS). CP urges NS, consistent with its duties to its shareholders, to assist constructively in this effort, but intends to proceed regardless of NS’s cooperation.
“While we remain fully confident in our comprehensive regulatory plan, shareholders of both CP and NS have recommended that we seek this declaratory order as a means to better understand the STB’s views on the proposed voting trust model ahead of any formal application,” said E. Hunter Harrison, CP’s Chief Executive Officer. “We still think this action is unnecessary, however, we believe listening to the shareholders – the owners of our respective companies – is important.”
Voting trusts have been used in hundreds of transactions involving regulated industries, including 144 transactions overseen by the STB since deregulation of the rail industry in 1980. Trusts, besides protecting against unlawful control violations, are a key means of reducing the risk that the regulatory approval process will either interfere with the marketplace’s assessment of a merger or be used as a tool by management to fend off would be acquirers.
While the declaratory order presents a hypothetical proposed trust – outside the established STB procedure for seeking formal trust approval – CP is hopeful that the STB will be able to offer clear guidance that will satisfy shareholders’ concerns before their voices are heard on CP’s pending resolution.
Earlier this month, CP submitted a resolution to NS shareholders to ask their board of directors to meet with CP to discuss the clear benefits of a business combination that would create a true end-to-end transcontinental railroad that would enhance competition, benefit the public and drive economic growth.
“NS has cited supposed regulatory uncertainty regarding the voting trust model as a reason not to talk to CP, and NS proposed that we seek a declaratory order. We are skeptical that the STB will give a definitive ruling, especially when NS will not even sit down with us, but we are willing to go the extra mile if that is what it takes to get NS to the table,” said Mr. Harrison.
CP strongly believes that a combined railroad would offer unparalleled customer service and competitive rates that will support the success of the shippers and industries it serves, and satisfy the STB and Canadian regulators.
For more information on CP’s proposal to NS, visit CPconsolidation.com.