Small shippers back CP-NS merger while larger shippers push against…
According to CP, though, it has received over 80 letters of support from a broad cross section of customers, only 62 of which have been posted to the Surface Transportation Board’s website. The number of letters from shippers in support of the proposed CP-NS combination is now more than three for every one shipper letter in opposition, CP said.
“These letters of support demonstrate that shippers with business in both the United States and Canada agree that the proposed combination would be beneficial,” the company said in a statement.
The majority of support for a CP-NS transcontinental railroad has come from shippers in the agriculture and metal recycling industries, who move goods on both intermodal and carload networks. Many of those letters of support repeat the benefits that CP itself has cited on numerous occasions since its first takeover bid in November — perhaps because much of that support comes from word-for-word form letters.
In each of these form documents, letter writers cite seven key reasons why a CP-NS merger would serve the public interest. Those include alleviating the long-standing issues of Chicago congestion; increasing capacity; creating efficient, reliable single-line service; eliminating the “bottleneck approach” when quoting rates; reducing highway congestion; offering improved customer service and competitive rates; and allowing other railroads access to CP-served shippers in terminal areas when service is not adequate or rates are non-competitive.
In some cases, letter writers did add details illustrating their company’s individual relationship with CP.
The Canadian division of auto manufacturer Kia, which has also thrown its support behind CP, highlighted, “Kia Canada Inc. has been using Canadian Pacific since Kia’s start up in Canada,” in its Feb. 11 letter.
Others like Taslar Trading, which specializes in exporting raw agricultural materials out of Canada, said a CP-NS railroad would provide an extended network, giving them access to East Coast ports, such as New York-New Jersey.
“This will probably shorten the transit time, improve efficiency and likely increase the revenue stream within U.S.,” Haslan Taslar, the firm’s managing director, wrote in a Feb. 12 letter.
Many letter writers, it should also be pointed out, are Canadian-based enterprises with limited transcontinental traffic who would not be significantly impacted by the merger in the first place.
Meanwhile, the only major mover of intermodal goods listed on the STB’s website, UPS, has come out against the combination.
The parcel giant told the STB in a Feb 9. letter that it feared a merger would hurt competition and service, and spark further consolidation that would only reduce rail reliability and shipper options further. UPS’ public declaration highlights shippers’ fear that improving intermodal rail service could falter if the railways are integrated.
“UPS does not believe that a NS-CP acquisition or hostile takeover is in the public interest, and encourages the board to deny any related voting trust or merger application,” the company said in the letter.
UPS is joined in its opposition to the merger by the likes of other movers and shakers including Subaru of America, CONSOL Energy and the Auto Alliance and Global Automakers.
Of course, it’s the support of NS shareholders and executives that CP will need in order to stand any chance of success before rail regulators on the STB.
While CP CEO Hunter Harrison once talked of a “street fight” to secure a majority stake in NS, the rhetoric has since cooled. CP has recently said it would abandon its pursuit of NS if it is unable to convince the Virginia-based railway’s shareholders to get the company’s board to enter negotiations.
Both railroads are also waiting to hear the official stance of NS shareholders on the deal. Earlier this month, CP submitted a resolution to shareholders at the Virginia company, requesting they ask their board of directors to meet with CP to discuss the rail merger. NS responded that it did not believe further discussions were in the best interest of its shareholders.
That is, unless CP can offer NS shareholders compelling value and address the regulatory issues inherent in its proposal, NS said.
CP has said it believes that a declaratory order from the STB could resolve at least one of those concerns. The declaratory order would either confirm or deny the feasibility of the voting trust structure that CP has suggested as part of its proposed merger.
According to an STB spokesperson, CP has still not filed the paperwork as of Thursday, and there is no statutory or regulatory deadline by which the board must make a ruling.