Thoughts on Canada ... (Tony Hatch, ABH Consulting)

Canada Flag

  • Canadians are seemingly waking up to the fact that TCI owns a major block of CN and is the largest shareholder in CP – see this Opinion Piece from their paper of record, The Globe & Mail: Opinion: A clear and present danger for the continued efficiency of rail transportation in Canada - The Globe and Mail.  But who’s to decide?  TCI is from the UK (and has a fiduciary duty to its portfolio).  Both carriers have “Canadian” in their title, but each has a huge/growing US presence (soon, Mexico for the CP) and current or historic US leadership, and each has global customers and truly international shareholders….This represents a quandary, if not necessarily an unprecedented one (see Gould, Jay).  In this case, what really constitutes “foreign”?  And how does one parse between passive, (who often own large share blocks of all of the railways, for example) active, and activist shareholders?  Does the Canadian Competition Act rule over a fight to buy a US/Mexican railway?  There are merits on Denton's arguments, which boil down to urging growth on one carrier and margin focus on the other, the existential issue at play here….

  • CN Luck, continued: The Canadian Transportation Agency (CTA) ruled that, due to its success in hauling 9% more grain tonnage in the 2020-21 crop year, CN was above their Maximum Revenue Entitlement while CP was below theirs – which requires CN to repay C$2.5mm – another sign of the insanity of Canadian grain regulation and a lesson for all rail regulation (hello, Marty?)  and makes us further nervous in the USA when we read “As prices rise, Biden deploys Antitrust team”, in the NY Times - all OK (I think) when discussing “Big Meat” (love it)but worrisome nonetheless – including this completely illogical sentence: “Administration officials say the biggest successes so far include blocking the merger of a large American railroad, Kansas City Southern, with a Canadian counterpart….”  Oh, really?

  • CN did announce a 7-year partnership with Google Cloud as part of their planned transition from PSR to (what I call) PSR 2.o to DSR>

  • CP, meanwhile, held serve, by extending in advance of deadline, their contracts with two mega-major customers, Canpotex and Canadian Tire (though gosh I wish it was “Tyre”)

 

Anthony B. Hatch 
abh consulting
http://www.abhatchconsulting.com 
[email protected]
Twitter @ABHatch18

ABH Consulting Logo (Crop) (1)