Union Pacific and Norfolk Southern are withholding key documents that are needed for rival railroads, shippers, and regulators to properly evaluate their transcontinental merger proposal, BNSF Railway and Canadian National have told the Surface Transportation Board.
In separate filings, BNSF and CN say the STB cannot properly assess the merger’s potential impacts on competition — or how to remedy any negative impacts — without having access to more internal documents than UP and NS have produced about their merger and its rationale.
Both railroads have asked the STB to force UP (NYSE: UNP) and NS (NYSE: NSC) to produce the documents.
“UP and NS are blocking efforts to see what they actually believe and discuss internally: whether the merger will hurt competition by reducing service or leading to higher rates for shippers; whether the executive teams actually believe the merger will enhance competition; where the integration could go awry and cause disruptions; and whether the purported benefits are achievable at all, or alternatively, achievable absent a merger,” BNSF (BRK-B) said in a filing on Friday.
BNSF has asked the STB to pause or reset the merger review schedule. It argues that UP and NS should be required to produce board presentations, banker and financial adviser analyses, and internal emails. The documents, BNSF says, will help evaluate claimed merger benefits, whether executives privately acknowledged potential competitive harms from the merger, and whether they considered alternatives short of a full merger.
CN (NYSE: CNI) takes a narrower approach, arguing that the UP and NS merger application withheld Schedule 5.8 of their merger agreement, which likely details how much regulatory risk the railroads anticipated, what merger conditions they were willing to accept, and how they allocated the risk of divestitures or other remedies.
“Given the scale and stakes of the proposed combination, the applicants must meet the highest standard of transparency and compliance. The information the applicants refuse to disclose is critical to understand their perspective on anticipated competitive harms and inform the Board’s public-interest and competition analyses,” Olivier Chouc, CN’s chief legal officer, said in a release Monday. “Rather than hide behind an inapt legal argument, the applicants should welcome the opportunity for a transparent and fulsome discussion about the merger’s impact on competition. Rather than trying to convince everyone that there is ‘nothing to see here,’ the applicants should instead be focused on meeting the rigorous and heightened standard called for by the new merger rules.”
CN also contends, in its regulatory filing, that withholding the schedule leaves the merger application procedurally incomplete under STB rules. The STB is expected to issue a decision in the next few days regarding whether the 6,692-page merger application is complete or will be rejected as incomplete.
BNSF and CN’s filings emphasize a common concern: What UP and NS say publicly may not match what they have discussed internally. And they argue that the internal documents will reveal whether executives expected the merger to result in greater pricing power, service disruptions, and how difficult regulatory approval is expected to be.
CN says its motion builds on earlier filings on completeness.The application included a number of other shortcomings, CN contends. Among them: incomplete market analyses, particularly covering shipper locations that are currently served by both UP and NS; missing projections for market share by revenue and traffic volume; and a failure to propose competitive enhancements.
Canadian Pacific Kansas City (NYSE: CP) has told the STB that it supports CN’s motion to compel UP and NS to provide more information.
Union Pacific says it stands by its merger application.
“Union Pacific is confident in the merits and completeness of our application. We will be reviewing any comments filed and working with the Surface Transportation Board as we move forward with the application process,” spokeswoman Kristen South said in an email to Trains.
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