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Canadian Pacific objects to US regulator against Canadian National’s candidacy for rail transport in Kansas City

A Kansas City Southern (KCS) freight train is pictured in Toluca, Mexico on October 1, 2018. REUTERS / Edgard Garrido / File Photo

Canadian Pacific Railway Ltd (CP.TO) (CP) said on Saturday that it had filed a formal objection with the US regulator, stating that Canadian National Railway Co.’s competitive bid (CNR.TO) for nearly $ 30 billion for Kansas City South (KSU.N) does not meet the requirements for exemption from stricter merger rules.

Last week, the US Surface Transportation Board (STB) rejected CP’s agreed offer of $ 25 billion for Kansas City South, meaning the deal will not be subject to the stricter rail merger rules the regulator introduced in 2001

CP won the exemption on the basis of its smaller size, and analysts and shareholders said STB’s decision reduced the regulatory risk for CP’s deal.

CP and larger competitor Canadian National (CN) are vying to take over the US Kansas City Southern Railway (KCS), which will create the first direct rail link between Canada, the United States and Mexico.

Both combinations seek to take advantage of the expected increase in trade since the US-Mexico-Canada Agreement was ratified last year.

In its argument submitted to the regulator on Friday, CP said that CN’s proposal to acquire KCS should be a cause for concern due to its size.

“The combined CN / KCS would significantly increase the size of the fifth largest railroad in the United States in Class 1, significantly increasing the gap between CN / KCS and … CP,” said the Canadian Pacific.

CN stated that it had voluntarily agreed to have its transaction with KCS reviewed by STB under these rules in order to demonstrate the competitive nature of the transaction and to address any competition concerns.

KCS did not immediately respond to a request for comment on the submission of the CP to the regulator.

CN released an unwanted offer for money and shares worth KCS of about $ 29.55 billion after CP agreed in March to buy KCS for about $ 25 billion.

Earlier, CP said it was not considering increasing its bid. KCS said earlier that its board had determined that CN’s competitive bid could be expected to lead to an “excellent offer”.

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