[Federal Register Volume 86, Number 75 (Wednesday, April 21, 2021)]
[Notices]
[Pages 20782-20783]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-08283]


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SURFACE TRANSPORTATION BOARD

[Docket No. FD 36500]


Canadian Pacific Railway Limited; Canadian Pacific Railway 
Company; Soo Line Railroad Company; Central Maine & Quebec Railway US 
Inc.; Dakota, Minnesota & Eastern Railroad Corporation; and Delaware & 
Hudson Railway Company, Inc.--Control--Kansas City Southern; The Kansas 
City Southern Railway Company; Gateway Eastern Railway Company; and The 
Texas Mexican Railway Company

AGENCY: Surface Transportation Board.

ACTION: Decision No. 3 in Docket No. FD 36500; notice of receipt of 
prefiling notification.

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SUMMARY: Canadian Pacific Railway Limited (Canadian Pacific), Canadian 
Pacific Railway Company (CPRC), and their U.S. rail carrier 
subsidiaries, Soo Line Railroad Company (Soo Line), Central Maine & 
Quebec Railway US Inc., Dakota, Minnesota & Eastern Railroad 
Corporation, and Delaware & Hudson Railway Company, Inc. (collectively, 
CP) and Kansas City Southern and its U.S. rail carrier subsidiaries, 
The Kansas City Southern Railway Company (KCSR), Gateway Eastern 
Railway Company, and The Texas Mexican Railway Company (collectively, 
KCS) (CP and KCS collectively, Applicants) have notified the Surface 
Transportation Board (Board) of their intent to file an application 
seeking authority for the acquisition of control by Canadian Pacific, 
through its indirect, wholly owned subsidiary Cygnus Merger Sub 2 
Corporation (Cygnus Merger Sub 2 Corp.), of Kansas City Southern, and 
through it, of KCSR and its railroad affiliates, and for the resulting 
common control by Canadian Pacific of its U.S. railroad subsidiaries, 
and KCSR and its railroad affiliates. Applicants have indicated that 
2019 will be the base year for their impact analysis and that they 
anticipate filing their application on or shortly after June 28, 2021.

ADDRESSES: Any filing submitted in this proceeding should be filed with 
the Board via e-filing on the Board's website. In addition, one copy of 
each filing must be sent (and may be sent by email only, if service by 
email is acceptable to the recipient) to each of the following: (1) 
Secretary of Transportation, 1200 New Jersey Avenue SE, Washington, DC 
20590; (2) Attorney General of the United States, c/o Assistant 
Attorney General, Antitrust Division, Room 3109, Department of

[[Page 20783]]

Justice, Washington, DC 20530; (3) CP's representative, David L. Meyer, 
Law Office of David L. Meyer, 1105 S Street NW, Washington, DC 20009; 
(4) KCS's representative, William A. Mullins, Baker & Miller PLLC, 
Suite 300, 2401 Pennsylvania Avenue, NW, Washington, DC 20037; (5) any 
other person designated as a Party of Record on the service list; and, 
as noted below, (6) the administrative law judge assigned in this 
proceeding.

FOR FURTHER INFORMATION CONTACT: Valerie Quinn at (202) 245-0283. 
Assistance for the hearing impaired is available through the Federal 
Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION: Applicants state that, on March 21, 2021, 
Canadian Pacific (along with two of its wholly-owned subsidiaries, 
Cygnus Merger Sub 1 Corporation and Cygnus Merger Sub 2 Corp.) and 
Kansas City Southern entered into an Agreement and Plan of Merger 
(Merger Agreement) under which Canadian Pacific, through its indirect, 
wholly owned subsidiary, Cygnus Merger Sub 2 Corp., would acquire all 
of the capital stock of Kansas City Southern. (Notice of Intent 2.) \1\ 
Specifically, Applicants state that, upon receipt of approval by the 
shareholders of Canadian Pacific and Kansas City Southern and the 
satisfaction of other customary closing conditions, Cygnus Merger Sub 2 
Corp. would merge with and into Kansas City Southern (Merger), with 
Kansas City Southern surviving. (Id.) Upon completion of the Merger, 
Applicants state that holders of Kansas City Southern's common stock 
would become entitled to receive a combination of Canadian Pacific 
common shares and cash in exchange for their common stock, and holders 
of Kansas City Southern's preferred stock would become entitled to 
receive cash in exchange for their preferred shares. (Id.) According to 
Applicants, immediately following completion of the Merger, Canadian 
Pacific would conduct a series of internal transactions that would 
result in its voting interest in the successor to Kansas City Southern 
being placed into an independent voting trust (Voting Trust) pending 
review and approval of the control transaction by the Board.\2\ (Id.) 
Applicants state that the internal transactions involve a series of 
steps designed to address matters relating to tax and corporate law, 
and all such steps, including the placement of Canadian Pacific's 
interest in Kansas City Southern into the Voting Trust, would be 
completed within moments of the completion of the Merger and for 
practical purposes contemporaneously. (Id. at 2-3.) Applicants state 
that, if and when the Board takes final and favorable action on the 
application, the Voting Trust would be terminated and Canadian Pacific 
would assume control of Cygnus Merger Sub 2 Corp. and, through it, of 
Kansas City Southern and its railroad affiliates. (Id. at 3.)
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    \1\ Applicants initially submitted a notice of intent on March 
22, 2021. However, on March 23, 2021, Applicants filed an errata and 
asked the Board to substitute a revised notice of intent for the 
notice of intent filed on March 22, 2021. As such, March 23, 2021, 
is deemed the filing date of Applicants' notice of intent to file an 
application under 49 CFR 1180.4(b).
    \2\ Canadian Pacific has submitted a proposed Voting Trust 
Agreement and seeks an informal, non-binding opinion from Board 
staff, pursuant to 49 CFR 1013.3(a), stating that the Voting Trust 
Agreement and the arrangements described in the letter accompanying 
the voting trust submission will effectively insulate Canadian 
Pacific from any violation of Board policy against unauthorized 
acquisition of control of a regulated carrier. Because there are 
differences between the Board's current regulations pertaining to 
voting trusts in major mergers and the regulations that were in 
effect before July 11, 2001, resolution of the waiver issue 
discussed in footnote 3 could also impact the voting trust request.
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    Applicants indicate that they will use 2019 as the base year for 
the impact analysis in the application and that they anticipate filing 
their application on or shortly after June 28, 2021. (Notice of Intent 
1.)
    Major Transaction Status. The Board finds that this is a major 
transaction under 49 CFR 1180.2(a), as it is a control transaction 
involving two or more Class I railroads. Canadian Pacific presently 
controls Soo Line, a Class I railroad, and proposes to acquire common 
control of KCSR, also a Class I railroad.\3\
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    \3\ Under 49 CFR 1180.0(b), the Board ``will waive application 
of the regulations contained in [49 CFR part 1180, subpart A] for a 
consolidation involving [KCSR] and another Class I railroad and 
instead will apply the regulations in this subpart A in effect 
before July 11, 2001 . . . unless [the Board is] shown why such a 
waiver should not be allowed.'' Comments on the waiver provision 
have been filed by several parties, and Applicants have filed 
replies. The Board will resolve the waiver issue in a subsequent 
decision.
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    Protective Order. By motion filed March 22, 2021, Applicants 
requested a protective order to protect confidential, highly 
confidential, and proprietary information to be submitted in connection 
with the control application. By decision served April 2, 2021 
(Decision No. 1), Applicants' motion for a protective order was 
granted.
    Proposed Procedural Schedule. Also on March 22, 2021, Applicants 
filed a petition to establish a procedural schedule. The Board will 
solicit comments on the proposed procedural schedule after it resolves 
the waiver issue discussed above.
    Administrative Law Judge. The Board has signed a Memorandum of 
Understanding with the Federal Mine Safety and Health Review Commission 
to employ the services of administrative law judges (ALJs) on a case-
by-case basis to perform discrete, Board-assigned functions such as 
adjudicating discovery disputes in cases pending before the Board. The 
Board hereby assigns and authorizes Administrative Law Judge Thomas 
McCarthy to entertain and rule upon discovery matters and to resolve 
initially all disputes concerning discovery in this proceeding. Parties 
are directed to send copies of all their filings and documents in this 
proceeding to Judge McCarthy, 1331 Pennsylvania Avenue NW, Washington, 
DC 20004-1710, and at [email protected] and [email protected].
    It is ordered:
    1. This proceeding is assigned to Administrative Law Judge Thomas 
McCarthy for the handling of all discovery matters and initial 
resolution of all discovery disputes.
    2. In addition to filing pleadings with the Board and serving 
copies on the Secretary of Transportation, the Attorney General of the 
United States, Applicants' representatives, and other parties of 
record, parties must send a copy of all filings and documents to Judge 
McCarthy at 1331 Pennsylvania Avenue NW, Washington, DC 20004-1710, and 
at [email protected] and [email protected].
    3. Judge McCarthy will be added to the service list in this 
proceeding and a copy of this decision will be served upon him.
    4. A copy of this decision will be served on the U.S. Office of 
Personnel Management (OPM), at Human Resource Solutions, ALJ Program 
Office, 1900 E Street NW, Suite 2469, Washington, DC 20415-9400 and 
electronically at [email protected]. Judge McCarthy shall send a copy 
of the notice or order that constitutes the final disposition of his 
assignment of this case to OPM at the above address.
    5. This decision is effective on its service date.

    Decided: April 15, 2021.

    By the Board, Board Members Begeman, Fuchs, Oberman, Primus, and 
Schultz.
Jeffrey Herzig,
Clearance Clerk.
[FR Doc. 2021-08283 Filed 4-20-21; 8:45 am]
BILLING CODE 4915-01-P