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Kansas City Southern says it will talk with rival bidder CN; CP welcomes regulatory ruling

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By Juby Babu and Kanishka Singh

(Reuters) -Canadian Pacific Railway on Saturday welcomed a favorable regulatory decision related to its proposed merger with Kansas City Southern, on the same day that Kansas City said its board has determined that a competing offer from Canadian National Railway could be expected to lead to a “superior proposal.”

Kansas City Southern said the board made its determination unanimously and said it would open negotiations with Canadian National, although it remains “bound by the terms of the CP merger agreement.” It noted that its board “has not determined” that the CN proposal “in fact constitutes a Company Superior Proposal.”

Canadian Pacific’s $25 billion cash-and-stock offer, at the time the deal was announced in March, values Kansas City Southern at $275 per share.

Canadian National’s rival cash-and-stock offer, made earlier this week, values Kansas City Southern at $325 a share.

Canadian Pacific on Saturday touted a ruling by the U.S. Surface Transportation Board, which oversees freight rail, that a waiver of stricter rules governing mergers granted to Kansas City Southern in 2001 would be applicable to a merger of Kansas City and Canadian Pacific.

The pre-2001 rule judges a proposed merger on whether it would adversely affect competition. Under the rule introduced in 2001, rail merger applicants must demonstrate that a proposed tie-up would be in the public interest. Kansas City Southern had been granted the waiver based on its small size.

The STB on Friday confirmed that the waiver it granted to Kansas City Southern in 2001 is applicable to the proposed friendly combination of the two companies.

Both companies expect the STB’s review to be completed by the middle of 2022.

According to the regulator, the merger would result in the smallest Class I railroad, based on U.S. operating revenues and also result in few overlapping routes.

Following Canadian National’s rival $33.7 billion offer for Kansas City Southern on Tuesday, CP said it would not raise its bid.

Canadian National Railway said in a statement on Saturday that it looked forward to engaging with Kansas City to finalize a merger agreement and that it welcomed the determination by Kansas City Southern’s board.

Canadian Pacific, in a response, said the Kansas City Southern board was simply meeting its obligations under the merger agreement with CP and fulfilling its “fiduciary duty” to its shareholders by assessing the Canadian National offer.

(Reporting by Juby Babu and Kanishka Singh in Bengaluru; Editing by Leslie Adler)

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Calgary Stampede to proceed with limited events

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The Calgary Stampede, an annual rodeo, exhibition and festival that is also Canada‘s biggest and booziest party, will go ahead this year after being pulled in 2020 due to the pandemic, though it will not look and feel the same, an event organizer told CBC Radio.

“It won’t be your typical Stampede … it’s not the experience that you had in years past,” Kristina Barnes, communications manager with the Calgary Stampede, told a CBC Radio programme on Friday.

She said organizers were still deciding whether to include rodeo or the grandstand show in this year’s version.

Known as “the greatest outdoor show on earth,” the Stampede draws tourists from around the world for its rodeo and chuckwagon races, but much of the action happens away from official venues at parties hosted by oil and gas companies.

“The Safest and Greatest Outdoor Show on Earth is what we’re going to call it this year,” Barnes said, adding the organizers are working directly with Alberta Health to ensure Stampede experiences stay “within the guidelines” that may be in effect in July.

The event is scheduled to take place between July 9-18, according to the Calgary Stampede website.

Last month, Alberta Premier Jason Kenney told reporters the Calgary Stampede can probably go ahead this year as Alberta’s coronavirus vaccination campaign accelerates.

Barnes and the office of the Alberta premier were not available for immediate comment.

The cancellation of the event last year was a crushing disappointment for Canada‘s oil capital.

The news comes as Alberta has been dealing with a punishing third wave of the pandemic, with the province having among the highest rate per capita of COVID-19 cases in the country. Data released on Friday showed the province had 1,433 new cases, compared with the seven-day average of 1,644.

 

(Reporting by Denny Thomas; Editing by Chris Reese)

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U.S. trade chief pressured to lift duties on Canadian lumber

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 As U.S. Trade Representative Katherine Tai prepares to meet her Canadian and Mexican counterparts on Monday to review progress in the new North American trade agreement, she is under pressure from home builders and lawmakers to cut U.S. tariffs on Canadian lumber.

Shortages of softwood lumber amid soaring U.S. housing demand and mill production curtailed by the COVID-19 pandemic have caused prices to triple in the past year, adding $36,000 to the average cost of a new single-family home, according to estimates by the National Association of Home Builders (NAHB).

Republican lawmakers have taken up the builders’ cause, asking Tai during hearings in Congress last week to eliminate the 9% tariff on Canadian softwood lumber imports. Senator John Thune told Tai that high lumber costs were “having a tremendous impact on the ground” in his home state of South Dakota and putting homes out of reach for some working families.

The Trump administration initially imposed 20% duties in 2018 after the collapse of talks on a new quota arrangement, but reduced the level in December 2020.

“The Biden administration must address these unprecedented lumber and steel costs and broader supply-chain woes or risk undermining the economic recovery,” said Stephen Sandherr, chief executive officer of the Associated General Contractors of America. “Without tariff relief and other measures, vital construction projects will fall behind schedule or be canceled.”

On Friday, White House economic adviser Cecilia Rouse said the Biden administration was weighing concerns about commodity shortages and inflation as it reviews trade policy.

The tariffs are allowed under the U.S.-Mexico-Canada Agreement on trade, which permits duties to combat price dumping and unfair subsidies.

The U.S. Commerce Department has ruled that lumber from most Canadian provinces is unfairly subsidized because it is largely grown on public lands with cheap harvesting fees set by Ottawa. U.S. timber is mainly harvested from privately-owned land.

Tai said she would bring up the lumber issue with Canadian Trade Minister Mary Ng at the first meeting of the USMCA Free Trade Council, a minister-level body that oversees the trade deal.

WILLING PARTNER

But Tai told U.S. senators that despite higher prices, the fundamental dispute remains and there have been no talks on a new lumber quota arrangement.

“In order to have an agreement and in order to have a negotiation, you need to have a partner. And thus far, the Canadians have not expressed interest in engaging,” Tai said.

Youmy Han, a spokeswoman for Canada‘s trade ministry, said the U.S. duties were “unjustified,” and that Canadian Prime Minister Justin Trudeau has raised the issue with U.S. President Joe Biden.

“Our government believes a negotiated agreement is possible and in the best interests of both countries,” Han said in an emailed statement to Reuters.

But builders are growing frustrated with a lack of high-level engagement with high-level Biden administration officials on the issue as they watch lumber prices rise.

“They are clearly still gathering facts, which is even more frustrating given that this issue has been going on since before the election, before the inaugural,” said James Tobin, a vice president and top lobbyist at the NAHB.

 

(Reporting by David Lawder and Jarrett Renshaw in Washington and David Ljunggren in Ottawa; Writing by David Lawder; Editing by Paul Simao)

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Centerra to fight Kyrgyzstan takeover of its gold mine

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Centerra Gold said on Sunday it has initiated binding arbitration against Kyrgyzstan government, after the parliament passed a law allowing the state to temporarily take over the country’s biggest industrial enterprise, the Kumtor gold mine operated by Centerra.

Recently, a Kyrgyzstan court also imposed $3.1 billion fine on Kumtor Gold Company (KGC), which operates the gold mine, after ruling that the firm had violated environmental laws.

The gold miner said that it intends to hold the government accountable in the arbitration for “any and all losses and damage” due to its recent actions against KGC and the Kumtor mine if no resolution is reached.

“The Government’s actions have left Centerra no choice but to exercise our legal rights, through the pursuit of arbitration and otherwise, to protect the interests of KGC, Centerra and our shareholders,” Centerra’s Chief Executive Officer Scott Perry said in a press release.

Kyrgyzstan has a long history of disputes with Centerra Gold over how to share profits from the former Soviet republic’s biggest industrial enterprise.

 

(Reporting by Maria Ponnezhath in Bengaluru; Editing by Lisa Shumaker)

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