WINNIPEG, Manitoba, April 26, (Reuters) - North America's
freight rail customers, from grain shippers to logistics
companies, are choosing sides as Canadian Pacific Railway Ltd
and Canadian National Railway fight to buy Kansas City Southern.
A takeout of KCS, would be the first major North
American railroad combination in more than 20 years and create
the first network to include the United States, Canada and
CN, Canada's biggest railroad, made an unsolicited
$30 billion bid for KCS on Tuesday, topping CP's agreed
$25 billion bid, but CP said last week it was not considering
raising its offer.
CN said on Monday that it was filing 409 letters of support
from shippers and suppliers with the regulator, U.S. Surface
Transportation Board (STB), pulling roughly even with CP's
stated level of support.
CP, which announced its combination with KCS on March 21,
has said that 416 shippers and other stakeholders have written
to STB in support.
CP supporters include shipping, container company
Hapag-Lloyd, agriculture company Viterra Inc
, an association representing Mexican auto makers, and
oil refiner Valero Energy Corp.
If CP buys KCS, the bulked-up company will be able to better
compete in North Dakota with dominant railway BNSF Railway Co
, said Kevin Karel, general manager at The Arthur
Companies, which ships corn and other crops by rail.
CP's line crosses the agricultural state of North Dakota
while CN's does not.
"We're really remote here, and so we need access to far more
destinations, and that's where this KCS merger really helps
North Dakota farmers," Karel said in an interview.
CN maintains that its combination with KCS would create a
network that is shorter and faster than rail or truck
Its supporters include pork producer Maple Leaf Foods
and steel manufacturer ArcelorMittal.
Some, like Coca-Cola Co, marine terminal operator DP
World, Canadian grain handler Richardson International and U.S.
food company Conagra are publicly supporting both rail
Shippers' views on the competing bids to the board may
determine how KCS assesses the relative regulatory risks,
investment bank Credit Suisse said in a note. CP has no
overlapping rail networks with KCS, unlike CN which runs
parallel for about 100 kilometers (62 miles) in Louisiana,
making it easier for CP's deal to clear regulatory hurdles.
CP on Saturday welcomed the U.S. regulator upholding a
waiver that exempts KCS from the same scrutiny larger railroads
face during proposed mergers. The STB had granted KCS, the
smallest of the Class 1 railways, an exemption from new merger
rules in 2001 because a combination involving KCS did not raise
the same concerns that any transaction among bigger railways
U.S. agribusiness Cargill Inc, and industry groups
for chemical producers, corn refiners, and a trade group that
promotes U.S. wheat exports had opposed use of the waiver,
saying that a takeover of KCS is big enough to warrant full
(Reporting by Rod Nickel in Winnipeg
Editing by Marguerita Choy)