The U.S. Surface Transportation Board (STB) has decided to uphold a 2001 waiver that will ease the path for the merger between Kansas City Southern and Canadian Pacific Railway Limited.
What Happened: The Canadian Pacific Railway Ltd. (NYSE: CP) won a petition for its proposed tie-up with Kansas City Southern (NYSE: KSU) to be exempt from the merger rules that the Surface Transportation Board’s (STB) had established in 2001, Reuters reports.
The STB on Friday confirmed that the waiver it granted to Kansas City Southern in 2001 is applicable to the proposed combination of the two companies.
The regulator’s ruling will help Canadian Pacific to gain approval of its bid for Kansas City Southern.
According to the STB, Canadian Pacific and Kansas City would remain the smallest of the large North American railroads based on U.S. operating revenues and result in few overlapping routes.
Why It Matters: In March, Canadian Pacific agreed to buy Kansas City Southern for $25 billion in a cash-and-shares deal to create the first U.S.-Mexico-Canada railroad.
The company had earlier stated that while it will remain the smallest of the six major U.S. Class 1 railroads by revenue, the merger will make its network more competitive by expanding its reach for customers.
The two railroads combined network will connect points throughout Canada and Mexico, and points in the Midwest, Northeast and South Central U.S.
Canadian railroads have run into antitrust issues when trying to expand into the U.S. in the past.
CP dropped a $28.4 billion hostile bid for Norfolk Southern Corp in 2016 and failed to finish a deal to buy CSX Corp in 2014.
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