Western Railroad Discussion > CN drops out of KCS bidding

Canadian National dropped out of the bidding war Wednesday for KCS. Apparently, there is not yet a definitive merger agreement between CP and KCS, though only CP is bidding, and KCS has determined it is a "company superior proposal." CP is free to purchase KCS prior to receiving permission to control KCS since its use of a voting trust has approval.

BobE

“While we are disappointed that we will not be able to deliver the many compelling benefits
of this transaction to our stakeholders,
the decision to bid for KCS was a bold and strategic move that still resulted in positive outcomes for CN.
We believe that the decision not to pursue our proposed merger with KCS any further is the right decision
for CN as responsible fiduciaries of our shareholders’ interests.
CN will continue to pursue profitable growth and opportunities for excellence as a leading Class I railroad,
and we look forward to outlining more details on our strategic, operational and financial priorities in the near future.”

• JJ Ruest, President and Chief Executive Officer of CN

Marcus Wrote in part:
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> CN will continue to pursue profitable growth and
> opportunities for excellence as a leading Class I
> railroad,
> and we look forward to outlining more details on
> our strategic, operational and financial
> priorities in the near future.”
>
>

• JJ Ruest, President and Chief Executive Officer
  > of CN

And I suspect that JJ Ruest will also be pursuing other opportunities outside CN headquarters in the near future:-)
WP17

WP17 Wrote:
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> And I suspect that JJ Ruest will also be pursuing
> other opportunities outside CN headquarters in the
> near future:-)

Lol, right. CN had bigger things to worry about now...

JG

 

Goodbye Speedway. It was nice while it lasted.

Posted from Android

Vicksburg_Route Wrote:
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> Goodbye Speedway. It was nice while it lasted.
>
> Posted from Android

NS still has their stake in it, so I don't think it's gone just yet.

Michael Fair
Royal Oak, MI

Vicksburg_Route Wrote:

> Goodbye Speedway. It was nice while it lasted.

Even though CN has stepped back from the pursuit of KCS, both the Meridian speedway and the Springfield, Illinois to Kansas City line seem like they would be good candidates to be offered to other Class I's to grease the merger skids. Probably wishful thinking on my part. I would love to see what CN could do with a Detroit-KC corridor. I would also like to see CN protect its' KCS Jax business and do what Moyers looked at doing many years ago in putting some of the IC pieces back together from the Harry Bruce garage sales.

Hoping for the best for all carriers and customers involved...

Ruest issues a bla, bla, bla statement and does not acknowledge a push to get rid of him.

I just wish we could somehow get rid of CP Rail! There about as popular as You Pee these days!

Txtrainman60 Wrote:
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> I just wish we could somehow get rid of CP Rail!
> There about as popular as You Pee these days!

Regulators may just grant you your wish. Stay tuned.

SantaFeRuss

tomstp Wrote:
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> Ruest issues a bla, bla, bla statement and does
> not acknowledge a push to get rid of him.

There is a push to get rid of him, and others byTCI.  Remember them?  They went after CSX some years back.  
CN: TCI House Cleaning Under Way - Railway Age
They want Vena back.  They can have him, glad he's gone from UP.

IC1038west Wrote:
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> Even though CN has stepped back from the pursuit
> of KCS, both the Meridian speedway and the
> Springfield, Illinois to Kansas City line seem
> like they would be good candidates to be offered
> to other Class I's to grease the merger skids.

The old GM&O line from East St. Louis and Springfield to Kansas City has never been that terribly attractive to anyone. It was always bracketed by better, higher-speed routes, and bigger railroads which had the ability to intercept the traffic and give the service to keep it. It was a lightly-used secondary line with the GM&O, and then with ICG, which was glad to sell it off to the group that first created Chicago, Missouri & Western, that became Gateway Western, and that passed to KCS. They have done the best with it. But at least as of the time I left the St. Louis area now about five years ago, it wasn't what you call bustling. Maybe that's changed since then.

NS doesn't need it -- it's already got the former Wabash. UP doesn't need it -- it's got the former MoPac. The Burlington gave up on its St. Louis - KC traffic (which used that line on trackage rights) a long time ago, and it's hard to see BNSF having much interest today, despite Santa Fe's longtime interest in that line and reaching St. Louis before the BNSF merger. With the Frisco, they essentially accomplished that. And they don't even use the former Frisco into St. Louis that heavily, which already has a good connection to the Transcon. No real need to go to KC the old GM&O way.

CSX could be interested. They'd almost certainly like to be in KC. But would it be worth all of the upgrades needed and the roundabout routing? I would bet that NS would fight that tooth and nail. Their KC-bound traffic on the former Wabash is a golden franchise, and always has been. They almost certainly do not want CSX in Kansas City to compete for any of it. And BNSF would not be particularly happy either. They do not want to surrender to CSX at KC any of what they can haul all the way into Chicago. Despite all of the congestion there. The rate divisions really, really matter. Cha-ching!!!

CN could make something of it too, making a good through route from the former IC mainline at DuQuoin, Ill.  through East St. Louis, and on to KC. Or via Springfield off the IC main at Gilman, Illinois.That wouldn't seem to directly challenge anybody else. But it could be a siphon that could become a major funnel. It would be roundabout, but CN could challenge CP (if it gets KCS) for lucrative Gulf Coast chemical traffic into KC. And for traffic out of the Chicago gateway that now has to go to somebody else to reach KC. Which was probably a big part of the reason why they wanted KCS in the first place.

In any case, it will be interesting to see what transpires.

MC
 



Edited 2 time(s). Last edit at 09/15/21 22:15 by ironmtn.

krm152  wrote:
------------------------
>Of note, TCI increased their CN ownershipo from 2.93% on May 18 to 5.17% on Sep 3 then complain about management.

TCI increased its stake above 5% to gain the right to requisition a special meeting of shareholders.

WP17 Wrote:
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> And I suspect that JJ Ruest will also be pursuing
> other opportunities outside CN headquarters in the
> near future:-)

Ruest is 66 and was ready to retire three years ago until the previous CEO, Luc Jobin, was axed after just two years (2016-18).

Meanwhile, in November, Ruest will receive the Rail Innovator Award at a convention in New York. He got a rave review in this connection from industry analyst Anthony Hatch in Progressive Rail magazine, who calls Ruest "market-driven and tech savvy", among other kudos. Worth a read.

https://www.progressiverailroading.com/canadian_national/article/From-the-Editor-Ruest-to-receive-Railroad-Innovator-Award-at-RailTrends--63644

This is not the first time that Ruest has been honored. He was named “Railroader of the Year” for 2018 by Railway Age magazine, which noted Ruest had taken “a railroad plagued with service problems and serious network capacity shortages and implemented aggressive capital investment and service quality programs.”  That verdict came after just nine months on the job.

 



Edited 2 time(s). Last edit at 09/16/21 05:24 by railsmith.

ironmtn Wrote:
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>
> The old GM&O line from East St. Louis and
> Springfield to Kansas City has never been that
> terribly attractive to anyone. It was always
> bracketed by better, higher-speed routes, and
> bigger railroads which had the ability to
> intercept the traffic and give the service to keep
> it. It was a lightly-used secondary line with the
> GM&O, and then with ICG, which was glad to sell it
> off to the group that first created Chicago,
> Missouri & Western, that became Gateway Western,
> and that passed to KCS. They have done the best
> with it. But at least as of the time I left the
> St. Louis area now about five years ago, it wasn't
> what you call bustling. Maybe that's changed since
> then.
>
> NS doesn't need it -- it's already got the former
> Wabash. UP doesn't need it -- it's got the former
> MoPac.

Concur with UPs lack of interest as they already have 2 main/directional track the entire way from KC to St. Louis and nearly 60% of the ex-GMO between St. Louis and Springfield is 2 main track (and 60+ mph track). Even between KC and Springfield IL there isn't as much of mileage savings as you think as it's only around 85 miles shorter via the Gateway Western vs ex-Mopac/ex-GMO through St. Louis plus UP can basically run that entire routing now without dealing with timely stops at sidings. Sure, going through St. Louis slows them down, but so would stopping at multiple sidings on the Gateway and waiting for barge traffic to clear at Louisiana MO as would occur on the Gateway Western. This doesn't even account for the fact the Gateway Western is currently a 40 mph, single track railroad with minimal sidings to handle 15+kft trains, meaning UP would have to toss in a ton of money with upgrades just to gain at most a couple hours for lower priority trains. Even with upgrades, UP already knows from running test trains on the parallel NS ex-Wabash line a couple years ago that they'll have to leave Z trains on the BNSF transcon between KC and G4 to remain competitive. Essentially, the Gateway Western doesn't help UP remove Z trains from the BNSF or improve transit times much for lower priority traffic running through St. Louis to justify spending money on it. Now if we were talking about somebody else spending the money on the Gateway and UP stumbles into ownership, then maybe it becomes possible.



Edited 3 time(s). Last edit at 09/17/21 08:05 by AaronJ.

ironmtn Wrote:
-------------------------------------------------------
>
> CSX could be interested. They'd almost certainly
> like to be in KC. But would it be worth all of the
> upgrades needed and the roundabout routing? I
> would bet that NS would fight that tooth and nail.
> Their KC-bound traffic on the former Wabash is a
> golden franchise, and always has been. They almost
> certainly do not want CSX in Kansas City to
> compete for any of it. And BNSF would not be
> particularly happy either. They do not want to
> surrender to CSX at KC any of what they can haul
> all the way into Chicago. Despite all of the
> congestion there. The rate divisions really,
> really matter. Cha-ching!!!

CSX is flat-out the most likely suitor for the Gateway Western...IF CP doesn't want it. Doesn't really matter what NS thinks, it would be the STB and since it would add competition and not reduce it...wouldn't be that difficult a hurdle to clear...especially if it ends up in some ownership split similar to the Meridian line.

>
> CN could make something of it too, making a good
> through route from the former IC mainline at

I highly doubt CP has any intention of playing nice with CN after the last few months. CN won't even get a single mile of trackage rights on the Gateway Western. This is essentially down to CP maintaining ownership alone or working with CSX for some variation of a joint ownership setup for the Gateway.

railsmith Wrote:
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> > TCI increased their CN ownershipo from
> 2.93% on May 18 to 5.17% on Sep 3. to gain the right
> to requisition a special meeting of shareholders.

Precisely.  TCI has been planning to raid CN all summer: well before CN lost on their voting trust bid.
ALLEN