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The US Surface Transportation Board (STB) on Tuesday rejected a voting trust proposed by Canadian National Railway for its $29 billion deal to buy US railroad operator Kansas City Southern.
The rail regulator’s ruling is a blow to Canadian National, which is locked in a takeover battle for Kansas City with smaller rival Canadian Pacific.
“The Board finds that the proposed use of a voting trust in the context of the impending control application does not meet the standards under the current merger regulations,” the regulator said in a statement.
Canadian Pacific’s voting trust was approved by the STB when the company had initially struck a $25 billion deal in March, only to be trumped later by Canadian National.
CP then improved its offer to $27 billion this month, hoping antitrust concerns will give it an edge over its larger rival, but Kansas City rejected the new bid though the offer remains on the table.
A voting trust would insulate the acquisition target from the acquirer’s control until the STB clears the deal on a permanent basis.
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