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  • CN (CNR) has formally filed a letter with the Surface Transportation Board (STB) regarding the company's proposal to acquire Kansas City Southern (KCS)
  • On April 20, CN made the proposal to the Kansas City Southern board.
  • The cash-and-stock transaction is valued at US$33.7 billion, or $325 per share
  • In the letter, CN lays out in detail why its proposal is pro-competitive and in the best interest of customers
  • Shares of CN are up 0.62 per cent on the day, and trading at C$138.08 at 12:01 pm ET

CN (CNR) has formally filed a letter with the Surface Transportation Board (STB) regarding the company's proposal to acquire Kansas City Southern (KCS).

On April 20, CN made the proposal to the Kansas City Southern board.

The cash-and-stock transaction is valued at US$33.7 billion, or $325 per share.

The offer quickly drew public criticism from the Chief Executive Officer of rival Canadian Pacific Railway (CP) Keith Creel, who called the bid "fool's gold" because of his belief it had little chance of U.S. regulators signing off on it.

In the letter, CN lays out in detail why its proposal is pro-competitive and in the best interest of customers.

CN retained Raymond A. Atkins of the law firm Sidley Austin LLP to pen the letter. Atkins is former General Counsel of the Surface Transportation Board.

The letter also takes aim at the CP claims.

"CP’s general claim that a CN-KCS would be 'anticompetitive' appears premised on both a gross overstatement of the actual competitive overlap and the assumption that not a single thing would be done to maintain rail competition for the small number of customers served by both CN and KCS. But as CP knows well, the major merger rules and Board precedent require remedies to address any reduction of competition for the handful of customer facilities that are served by both CN and KCS," writes Atkins on behalf of CN.

"In sum, CN urges the STB to review any proposed acquisition of KCS under its current merger guidelines. Doing so would provide the STB and all interested stakeholders with a forum and tools to fully vet the proposed transaction. As CN argued in the Notice of Intent it filed in Finance Docket No. 36514, 'mergers involving KCS should not be subject to a different set of rules'.”

Shares of CN are up 0.62 per cent on the day, and trading at C$138.08 at 12:01 pm ET.

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