CN tries to address concerns about its $33.6B railroad deal

OMAHA, Neb. (AP) — Canadian National railroad plans to address competitive concerns related to its $33.6 billion acquisition of Kansas City Southern by selling off a short section of rail line.

Canadian National CEO JJ Ruest said he believes selling 70 of the 27,000 miles of track the two railroads own will help it get regulatory approval for the deal. The railroads resubmitted their application for initial approval of the deal on Wednesday and tried to address questions the Surface Transportation Board raised last week.

On Friday, Canadian National won the bidding war for Kansas City Southern over a competing $25 billion bid from Canadian Pacific railroad, but CP said it plans to continue pursuing regulatory approval for its combination with Kansas City Southern so it will be prepared if the CN deal fails to get approval.

Canadian National said the rail line that would be sold connecting Baton Rouge and New Orleans in Louisiana is the only area where the two companies directly overlap. Yet Canadian Pacific maintains that competition will be hurt across much of central United States because Canadian National and Kansas City Southern both operate parallel rail lines that connect the Midwest to the Gulf Coast. Canadian Pacific said its proposed combined rail network would also divert more traffic around Chicago while CN's plan would send more railcars through that already congested area.

Canadian National plans to set up a voting trust that would acquire Kansas City Southern and hold the railroad during the Surface Transportation Board's lengthy review of the overall deal. Last week, regulators rejected CN's initial plan for that voting trust because at that point the railroads hadn't submitted a detailed copy of their merger agreement, but the STB said it would take a cautious approach to approving the plan. The...