Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Justice Department opposes Canadian Pacific’s proposed voting trust, (Apr 8, 2016)

By Michael Menzhuber, J.D., LL.M.

The Department of Justice has filed a reply opposing Canadian Pacific Railway Limited’s (CPRL) petition for a declaratory order regarding the use of a voting trust, pending the Surface Transportation Board’s review of a potential merger between Canadian Pacific Railway Company and Norfolk Southern Railway Company, the agency announced today.

Under the proposed voting structure: (1) CPRL, the holding company for Canadian Pacific, would acquire Norfolk; (2) Canadian Pacific’s stock would be placed in trust; and (3) the current CEO for Canadian Pacific would become CEO of Norfolk.

As explained in the DOJ’s reply, the proposed voting structure fails under each prong of the Surface Transportation Board’s regulatory requirements. Specifically, the proposal: (1) fails to preserve the independence of Canadian and Norfolk; (2) gives both Canadian and Norfolk economic incentives and the ability to align their business strategies prior to a review of the transaction; and (3) makes it difficult, if not impossible, to effectuate a successful divesture if the Surface Transportation Board rejects the merger applications. Accordingly, the Justice Department urges the Surface Transportation Board to reject the proposed voting trust structure or, in the alternative, to deny the request for a declaratory order.

The Surface Transportation Board is an independent agency, with discretion pursuant to the Administrative Procedure Act, to issue declaratory orders to terminate a controversy or remove uncertainty.

Companies: Canadian Pacific Railway Limited

News: AcquisitionsMergers Antitrust