CN and Kansas City Southern (“KCS”) today highlighted the benefits realized by grain customers, including farmer-owned grain co-operatives, through CN’s open gateways commitment in the CN-KCS combination. These stakeholders, including agricultural customers in the Upper Midwestern U.S., would benefit from a choice of routes and competitive rates, better service and innovation resulting from the competition for their business.
“CN’s commitment to keep gateways open on commercially reasonable terms means that agricultural customers, including farmer-owned co-operatives, enjoying competitive joint line routings with CN or KCS, will continue to have those routings available upon completion of the merger,” said James Cairns, CN’s Senior Vice President, Rail Centric Supply Chain. “This commitment assures grain customers shipping over CP lines to Kansas City and beyond will continue to enjoy the interline service they have today, along with new, enhanced rail-to-rail competition. However, for these benefits to be realized, the CN voting trust must be approved by the Surface Transportation Board (“STB”).”
In an op-ed published by Railway Age on June 22nd, Dr. William Huneke, the former Director of the Office of Economics and Chief Economist at STB described CN’s open gateways commitment as a “big deal,” stating:
“This commitment ensures that shippers who today enjoy competitive joint line routings with either CN or KCS will continue to have those routings available to them in a post CN/KCS merger environment, even if a merged CN/KCS could handle the entire movement via a single-line routing.”
“This means continued competition, and we know that competition encourages lower rates, better service and innovation.”
“The commitment is not just about maintaining physical routings, but also about ensuring that the routings are commercially reasonable to the shipper. What is meant by “open on commercially reasonable terms”? This means all market participants, railroads and shippers will benefit: They will get a fair chance to compete. They will pay and receive remunerative rates and get efficient service. If a shipper is not happy with their service, they can switch to another carrier because they will still have a choice.”
“A CN/KCS combination will create a strong new rail-to-rail competitor that will provide new single-line rail movements in competition with other rail carriers. In addition, with the gateway commitment, shippers will also have the option to use an existing routing or other routings involving more than just the merged CN/KCS.”
More than 1,500 letters in support of the CN-KCS combination have been sent to CN and KCS and filed with the STB from customers, suppliers, elected officials and other stakeholders. A list of our supporters can be found at www.ConnectedContinent.com.
For the combination of KCS and CN to proceed, the STB must first approve the use of a voting trust. CN’s plain vanilla voting trust, which is identical to the CP trust approved for use by the STB, is an integral component of the CN-KCS combination. It prevents premature control of KCS, allows KCS to maintain independence and protects KCS’ financial health during the STB’s review of the ultimate combination of CN and KCS. Additionally, CN has committed to divesting the sole area of overlap between the CN and KCS networks – KCS’ 70-mile line between New Orleans and Baton Rouge – thereby making the combination a true end-to-end transaction, and has agreed to preserve existing route options by keeping gateways open on commercially reasonable terms. The proposed CN-KCS combination represents a procompetitive solution that offers unparalleled opportunities for customers, employees, shareholders, the environment and the North American economy.