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1 1 (September 2, 2021)

handle is hein.crs/govegbr0001 and id is 1 raw text is: Congressional ____ ~* Research Service Canadian Railroads Competing to Acquire Major U.S. Freight Line Updated September 2, 2021 Canadian Pacific Railway (CP) and Kansas City Southern (KCS), two of the seven Class I companies that handle long-distance U.S. rail traffic, announced a merger agreement in March. In April, another Class I carrier, Canadian National (CN), submitted what it termed a superior proposal to acquire KCS, which was accepted in May. Either deal, if approved by shareholders and federal regulators, would be the largest consolidation of major railroads in several decades, and would create the first railroad network to serve Canada, the United States, and Mexico under a single corporate owner. While this could lead to better service for some shippers, it could also have adverse consequences for competition in freight transportation. Any transaction is likely to undergo lengthy review by the Surface Transportation Board (STB). On August 31, all five STB commissioners voted to deny CN's request to create a voting trust to hold shares of KCS, an arrangement that would have allowed CN to acquire shares while the merger is still pending before the Board. The decision follows President Biden's July executive order encouraging federal agencies to take steps to preserve competition throughout the economy. While STB's decision may or may not reflect the merger's prospects, it signals that regulators are considering the potential implications closely. Background CP and CN, both based in Canada, are among the survivors of the extended consolidation in the U.S. railroad industry, along with Union Pacific and BNSF in the western United States, CSX and Norfolk Southern in the East, and KCS running north-south through the middle of the country and into Mexico. Since the 1990s, only smaller carriers have changed hands. Potential mergers among Class I carriers-for example, CP explored a merger with CSX in 2014 and with Norfolk Southern in 2020-have triggered vociferous objections and have not come to fruition. CP and CN both serve Canada from coast to coast, but also own railroads and trackage rights in the United States (Figure 1). Both carry significant traffic between U.S. points and Canadian ports. CN also controls a north-south freight corridor connecting Chicago to New Orleans, which it acquired in 1998. In approving that transaction, STB pointed to the importance of having KCS as a competitor in the same markets. KCS, meanwhile, controls around 6,700 miles of track in the United States and Mexico, Congressional Research Service https://crsreports.congress.gov IN11671 CRS INSIGHT Prepared for Members and Committees of Congress