Commentary

Leasing Improvements May Be Unsustainable

FINANCIAL EDGE, RAILWAY AGE AUGUST 2021 ISSUE: Ah, the summer doldrums. While many were hoping for carefree days and a return to normalcy, sadly, the world continues to fret and struggle with the coronavirus and its Delta variant. However, in the shadows of this looming global crisis, the world of North American rail is all atwitter with political activity and other news-grabbing headlines.

Commentary

A Fight for Shareholder Approval

Canadian Pacific, CN and Kansas City Southern have been battling for votes in KCS’s upcoming shareholder vote on August 19 to approve or reject the CN transaction. CP has been actively telling investors to vote no, while KCS and CN have been pushing for approval. It remains uncertain if there will be a decision from the STB on a CN/KCS voting trust prior to the shareholder vote. We continue to believe that there is a 60% chance of approval for the voting trust, but remain wary of the political climate.

STB Issues Decision on CP’s Declaratory Order Petition

The Surface Transportation Board (STB) has granted in part Canadian Pacific’s (CP) petition for declaratory relief: It confirmed that CP may use “discovery” under STB regulations to seek relevant material from Kansas City Southern (KCS) to prepare its control application.

KCS Speaks Out on CP’s Preliminary Proxy Statement

Canadian Pacific’s SEC filing asking Kansas City Southern shareholders to vote against the proposed CN-KCS combination is “part of an effort to defeat a transaction that offers KCS shareholders $50 per share more than CP was willing to offer,” KCS said in an Aug. 2 statement.

CP to KCS Shareholders: Read the Blue Card and Vote Red (“Stop”)

Know your colors and words: Canadian Pacific has filed a preliminary proxy statement and accompanying “BLUE” proxy card with the Securities and Exchange Commission (SEC) to be used to solicit votes of Kansas City Southern (KCS) shareholders to vote “AGAINST” the proposed CN-KCS combination at a scheduled Aug. 19, 2021 KCS special shareholders meeting.

CP: ‘Extremely Well Positioned’ for Second-Half ’21

“Our ability to deliver sustainable, profitable growth has never been stronger,” Canadian Pacific (CP) President and CEO Keith Creel said during the railroad’s second-quarter 2021 earnings announcement.

STB to Class I’s: Terminal Congestion, Demurrage Data, Please

Surface Transportation Board (STB) Chairman Martin J. Oberman has called on the CEOs of the seven North American Class I’s to provide information on the extent of congestion at key U.S. container terminals and on their policies and practices for assessing container demurrage fees, citing reports of “substantial charges being levied by the railroads for container storage at these terminals.”

CN: ‘Strong’ 2Q21, Voting Trust Answer Expected Soon

CN followed potential merger partner Kansas City Southern (KCS) in reporting financial results for second-quarter 2021, noting C$3.598 billion in revenues—an increase of 12% over the prior-year period—and a 13% increase in revenue ton-miles (RTMs).

KCS 2Q21: Strong Volume; Service ‘Short of Expectations’ (Updated, Cowen)

Kansas City Southern (KCS) on July 16 was the first Class I to report second-quarter 2021 earnings. For the possibly merger-bound railroad, revenue of $749.5 million grew 37% from the prior-year period ($547.9 million) based on higher carload volumes (up 31%), higher fuel surcharge, and the strengthening of the Mexican peso against the U.S. dollar. Service quality, however, was somewhat short of company expectations.

KCS Stockholders to Vote on Merger Proposal

Kansas City Southern (KCS) stockholders will vote on the railroad’s proposed combination with CN on Aug. 19.

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