TCI claims CN's board of directors would be "negligent and hugely irresponsible" to risk
That figure includes a
TCI argues CN should abandon its pursuit of the
Unlike CP Rail, whose proposed takeover of KCS received an exemption from strict merger rules enacted in 2001, the regulator says CN would face a tougher standard, adding that the “use of a voting trust is a privilege, not a right” and will be available only on “rare occasions.”
"The STB is sending a clear signal and the CN board has a duty to listen. The risk that the voting trust is not approved is too great to ignore," said the TCI letter to CN's board.
"CN’s board believes its pro-competitive combination with
The
TCI says CN's board can't have any confidence in how the new rules will be interpreted because they've never been used before.
"Making what is essentially a
Even if the voting trust is approved, TCI says CN could face a
"This would almost wipe out CN’s entire shareholders’ equity that it has taken over 100 years to accumulate. It could also seriously jeopardize the future of the company."
While the risk for CN exists, it likely wouldn't be a dire as has been portrayed, suggested
"There's likely to still be bidders for the rail whether it's CP that comes back into the fold or private equity at that point," he said in an interview.
"So I think the risk to CN is not massive although I would agree totally that the risk that CN is denied is much higher than the risk that CP is denied."
Meanwhile, some railway unions have told the STB that they're concerned that a bidding war between
"There is a likelihood that innocent bystanders — employees of CP, CN and KCS, and shippers which use those carriers — will pay a price for this exercise in one-upmanship," said several unions that together are referred to as the Allied Rail Unions.
"The successful bidder, having spent more than what was anticipated and what is reasonable would likely seek to recoup its excess expenditures by seeking so-called cost-cutting 'efficiencies' from railworkers; and it would likely seek to reduce other costs, which, in turn, would diminish service."
Jerusalim said the deals as they stand are strategically worth a lot to either CN or CP and shouldn't result in excessive cost-cutting. But he added the union has a fair argument that being forced to pay more, including by adding debt, does raise worries.
"The more the winning party is going to have to find ways of extracting that value for their own shareholders and that's either through higher pricing or cutting costs and you could see why unions would not be in favour of that."
This report by
Companies in this story: (TSX:CNR, TSX:CP)
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