Canadian National to Sell Rail Asset to Defuse Kansas City Southern Antitrust Concerns

Canadian National Railway’s main rail lines travel across Canada and south into the U.S. A Canadian National train in Montreal in 2015.



Photo:

christinne muschi/Reuters

Canadian National Railway Co.

CNI 2.69%

is offering to sell a 70-mile stretch of its Louisiana rail network to defuse antitrust concerns as it seeks regulatory approval for its roughly $30 billion agreement to merge with

Kansas City Southern,

KSU 0.34%

people familiar with the matter said.

The two railroads plan to jointly file a motion with the U.S. Surface Transportation Board Wednesday morning seeking approval for a voting trust to acquire Kansas City Southern stock from its shareholders, the people said. The STB’s review of the proposed trust is the first of a lengthy two-step regulatory process that requires the regulator to ensure that major railroad mergers are in the public interest and enhance competition.

Canadian National’s main rail lines travel across Canada and south into the U.S. through such major hubs as Chicago, Detroit and New Orleans. Kansas City Southern routes extend from Illinois to Southern Mexico. The two railroads operate nearby routes from Baton Rouge to New Orleans that largely ship chemical products. The railways share some customers on the route region.

Canadian National would sell the Louisiana section if its proposed merger is approved by the STB, the people said

There have been no major railroad mergers in the U.S. for two decades after a handful of industry combinations triggered widespread complaints about poor service.

Canadian Pacific Railway Ltd.

sought to break the deal gridlock with an agreement in March to merge with Kansas City Southern for about $25 billion in cash and stock, but it was outbid by its bigger competitor Canadian National earlier this month. The STB’s review of the Canadian National and Kansas City merger is expected to last well into next year.

Write to Jacquie McNish at Jacquie.McNish@wsj.com

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