Commitment Does Not Eliminate Anti-Competitive
Issues with CN Proposal
CALGARY, AB, May 27, 2021 /CNW/ - Canadian Pacific Railway
Limited (TSX: CP) (NYSE: CP) today issued the following statement
in response to Canadian National's ("CN") commitment to divest
Kansas City Southern's ("KCS") line between New Orleans and Baton Rouge:
CN's commitment to divest this 70-mile line is clear recognition
by CN that it and KCS have always been head-to-head competitors,
contrary to CN's repeated claims that the combination was
"end-to-end." However, CN's commitment does not come close to
solving the anti-competitive problems inherent in the proposed
CN/KCS transaction.
In particular, this token divestment would not begin to address
the competitive issues in the rail corridors running north from
Louisiana and Mississippi through America's heartland, where
KCS and CN have historically competed. It does not address many
shippers and stations that are today served by both KCS and CN in
markets like Omaha/Council Bluffs,
Jackson, MS, Springfield, IL, and St. Louis. It does not address geographic
competition between CN and KCS in numerous areas where each of them
competes to handle similar commodities to/from different shippers,
terminals, and transloads in the same region. And it does not
address the impact a CN/KCS combination would have on customer
access to CP routes serving the Upper Midwest and Canada. Rail customers in all of these
situations likely would see reduced competitive options as well as
reduced service quality and infrastructure investments as a result
of the CN transaction.
If this divestment occurred, it is not clear it would be
effective even in addressing the loss of competition for shippers
on KCS' line between Baton Rouge
and New Orleans. CN offers no
details regarding to whom and on what terms the divestment would be
carried out, despite those details mattering to
competition. And during the year and a half when CN would be
seeking to close their acquisition of KCS, competition in this
corridor would be diminished as CN and KCS managers each would know
that their railroads' profits flowed to the same owner – CN.
Furthermore, if CN is allowed to hold KCS in trust for the
three-and-a-half years as it proposes – an arrangement that leaves
CN the winner whether it competes or not – shippers will lose
competition during that entire period regardless of the outcome of
the Surface Transportation Board approval process. This goes
directly to the concerns raised by the Department of Justice about
incentives while in trust and, in our view, is inconsistent with
the public interest.
FORWARD-LOOKING STATEMENTS AND INFORMATION
This news release includes certain forward-looking statements
and forward looking information (collectively, FLI). FLI is
typically identified by words such as "anticipate", "expect",
"project", "estimate", "forecast", "plan", "intend", "target",
"believe", "likely" and similar words suggesting future
outcomes or statements regarding an outlook. All statements other
than statements of historical fact may be FLI.
Although we believe that the FLI is reasonable based on the
information available today and processes used to prepare it, such
statements are not guarantees of future performance and you are
cautioned against placing undue reliance on FLI. By its
nature, FLI involves a variety of assumptions, which are based
upon factors that may be difficult to predict and that may involve
known and unknown risks and uncertainties and other factors which
may cause actual results, levels of activity and achievements to
differ materially from those expressed or implied by these FLI,
including, but not limited to, the following: changes in business
strategies and strategic opportunities; estimated future dividends;
financial strength and flexibility; debt and equity market
conditions, including the ability to access capital markets on
favourable terms or at all; cost of debt and equity capital;
potential changes in the CP share price; the ability of management
of CP, its subsidiaries and affiliates to execute key priorities;
general North American and global social, economic, political,
credit and business conditions; risks associated with agricultural
production such as weather conditions and insect populations;
the availability and price of energy commodities; the effects
of competition and pricing pressures, including competition from
other rail carriers, trucking companies and maritime shippers in
Canada and the U.S.; North
American and global economic growth; industry capacity; shifts in
market demand; changes in commodity prices and commodity demand;
uncertainty surrounding timing and volumes of commodities being
shipped via CP; inflation; geopolitical instability; changes in
laws, regulations and government policies, including regulation of
rates; changes in taxes and tax rates; potential increases in
maintenance and operating costs; changes in fuel prices; disruption
in fuel supplies; uncertainties of investigations, proceedings or
other types of claims and litigation; compliance with environmental
regulations; labour disputes; changes in labour costs and labour
difficulties; risks and liabilities arising from derailments;
transportation of dangerous goods; timing of completion of capital
and maintenance projects; sufficiency of CP's budgeted capital
expenditures in carrying out CP's business plan; services and
infrastructure; the satisfaction by third parties of their
obligations to CP; currency and interest rate fluctuations;
exchange rates; effects of changes in market conditions and
discount rates on the financial position of pension plans and
investments; trade restrictions or other changes to international
trade arrangements; the effects of current and future multinational
trade agreements on the level of trade among Canada and the U.S.; climate change and the
market and regulatory responses to climate change; anticipated
in-service dates; success of hedging activities; operational
performance and reliability; regulatory and legislative decisions
and actions; public opinion; various events that could disrupt
operations, including severe weather, such as droughts, floods,
avalanches and earthquakes, and cybersecurity attacks, as well as
security threats and governmental response to them, and
technological changes; acts of terrorism, war or other acts of
violence or crime or risk of such activities; insurance coverage
limitations; and the pandemic created by the outbreak of COVID-19
and resulting effects on CP's business, operating results, cash
flows and/or financial condition, as well as resulting effects on
economic conditions, the demand environment for logistics
requirements and energy prices, restrictions imposed by public
health authorities or governments, fiscal and monetary policy
responses by governments and financial institutions, and
disruptions to global supply chains.
We caution that the foregoing list of factors is not exhaustive
and is made as of the date hereof. Additional information about
these and other assumptions, risks and uncertainties can be
found in reports and filings by CP with Canadian and U.S.
securities regulators. Reference should be made to "Risk Factors"
and "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Forward-Looking Statements" in CP's
annual and interim reports on Form 10-K and 10-Q. Due to the
interdependencies and correlation of these factors, as well as
other factors, the impact of any one assumption, risk or
uncertainty on FLI cannot be determined with certainty.
Except to the extent required by law, we assume no obligation to
publicly update or revise any FLI, whether as a result of new
information, future events or otherwise. All FLI in this news
release is expressly qualified in its entirety by these cautionary
statements.
ABOUT CANADIAN PACIFIC
Canadian Pacific (TSX: CP) (NYSE: CP) is a transcontinental
railway in Canada and the United States with direct links to major
ports on the west and east coasts. CP provides North American
customers a competitive rail service with access to key markets in
every corner of the globe. CP is growing with its customers,
offering a suite of freight transportation services, logistics
solutions and supply chain expertise. Visit www.cpr.ca to see the
rail advantages of CP. CP-IR
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SOURCE Canadian Pacific