Cowen Snap Shipper Survey Appears to Favor CPKC

Written by William C. Vantuono, Editor-in-Chief
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Jason Seidl

A Cowen and Company “snap” railroad shipper survey conducted over a one-day period indicates that CN “is likely to have a more difficult time with shippers supporting its proposed acquisition of Kansas City Southern. This compares to a more favorable view by shippers of Canadian Pacific acquiring KCS in our most recent survey.”

According to Cowen Managing Director and Railway Age Wall Street Contributing Editor Jason Seidl, who conducted the survey with colleagues Matt Elkott and Elliot Alper, 20% of shippers surveyed said a combination of CN/KCS would cause them to lose a rail shipping option, “a higher number than we would have thought.”

“Given how time-sensitive deals like this can be, we conducted this survey over a roughly 24-hour period,” the analysts noted. “In contrast, our large quarterly survey gives shippers about two weeks to record their responses. We were impressed with our response rate that included more than 100 shippers. This was our best way to gauge the seemingly different views competing Canadian Class I suitors had in terms of how the shipping community felt. When we compare these results to our prior snap survey of CP’s proposed acquisition of KCS, the results reveal less support by the shipping community for CN’s proposal vs. a largely more positive response to CP’s deal.”

Following are detailed results of the survey:

“We asked participants if they have a positive or negative view of the CN merger transaction. 25% of participants have a positive view of the transaction, while 45% have a negative view. 30% have no opinion. We asked this same question in our most recent snap survey on the CP/KCS transaction, where 44% had a positive view, and just 18% had a negative view.

“We asked the participants who had a negative opinion toward the transaction if they planned to take action with the Surface Transportation Board. 59% of participants that opposed the transaction do not plan to take action with the STB, while 5% do plan to take action. 36% have not yet decided if they will take action. We asked this same question in our CP/KCS survey, which showed similar results, in that a small percentage of shippers actually plan to take action with the STB. For better or worse, we acknowledge shippers have had more time to digest news surrounding the overall transaction during this most recent survey.

“We asked if a combination of CN/KCS would cause them to lose a rail shipping option. This is a question we did not ask in our CP/KCS survey, given there seems to be little to no overlap in a CP deal. 20% of shippers said a combination of CN/KCS would cause them to lose a rail shipping option, while 54% answered that the combination would not. 26% of participants were unsure.

“Finally, we asked our participants, ‘If you had to choose who wins the KCS deal, who would it be?’ We asked this to gauge what shippers wanted to happen to KCS. We gave shippers various options, and CP was the winner, with 36% of participants wanting CP to acquire KCS. 34% of those surveyed would like to see KCS stay independent; 16% chose CN as their preferred acquirer; and 15% chose to break it up between CN and CP, like Norfolk Southern and CSX did in the late 1990s.”

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