David George-Cosh

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The head of Canadian Pacific Railway Ltd. said he welcomes the company's main rival Canadian National Railway Co.'s plans to serve as a "watchdog" for its upcoming acquisition of Kansas City Southern, stating its planned continental railroad will not act in an "anti-competitive manner". 

"From a watchdog standpoint, I welcome them to watch because we don't have bad facts. I've said this from the beginning and the facts were all tied to the anti-competitive nature of the deal," said Keith Creel in an interview on Friday. 

He added that the tie-up between CP and KCS will help to enhance competition amongst the group of six major North American railroads.  

"Our facts are good, our facts are pro-competitive,” he said. "There is no overlap, there are no customers that have less options. It's all about customers with more options." 

Earlier on Friday, CN Rail said in a release it planned to keep a close eye on how CP Rail's deal for KCS plays out. CP Rail expects to close its acquisition of KCS by the second half of 2022 following regulatory and government approvals. 

"CN will continue to engage with market participants, railroads and shippers to ensure that all regulatory rules are enforced fairly, and customers do not suffer anti-competitive effects arising from a combination between Canadian Pacific and KCS," CN said in its release.

The combined CP-KCS rail network would span Canada, the U.S. and Mexico with over 20,000 miles of track and US$8.7 billion in annual revenue.  

The deal was announced after CN Rail withdrew its offer for KCS following the rejection of a voting trust proposal by the U.S. Surface Transportation Board (STB) which effectively made the regulatory risk unsurmountable for an agreement to be made between the two companies. 

One of the key points that the U.S. regulator highlighted in its rebuke against the voting trust proposal was concerns about changes to the competitive fabric of the U.S. railroad industry, and that a CN-KCS combined company would increase the likelihood of future rail mergers, and thus would not be in the public interest. As well, there were noted concerns about overlapping rail lines that CN and KCS both operated of which would need to be divested to make a deal work. 

"The STB was not going to allow combinations that eliminated competition, that had anti-competitive natures, that had overlaps," Creel said. 

Creel declined to comment specifically on CN Rail's wide-ranging strategic plan the company announced on Friday in reaction to a possible proxy fight against TCI Fund Management Ltd., a major shareholder in both railroads. He noted that he has a "very positive relationship" with TCI and they have been vocal in terms of CP Rail's environmental impact and other operational performance issues. 

Creel did state that CN Rail is "facing challenges" but wants the company to be a "strong competitor" in the railroad industry. 

"I think it's great for our team when we have someone to compete against, we become better competitors ourselves," Creel said.