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STB approves voting trust for Canadian Pacific's proposed acquisition of Kansas City Southern

FILE PHOTO: A logo of KCS Railway Company is pictured in Toluca

(Reuters) - The U.S. Surface Transportation Board (STB) on Thursday approved the voting trust for Canadian Pacific Railway's proposed acquisition of Kansas City Southern railroad .

Canadian Pacific (CP) had earlier agreed in its talks with U.S. railroad Kansas City Southern (KCS) to bear most of the risk of the merger deal not going through. It was going to buy KCS shares and place them in an independent voting trust, insulating the acquisition target from its control until the STB, which oversees freight rail, clears the deal.

"In order to close into voting trust, the transaction requires approval from shareholders of both companies along with satisfaction of customary closing conditions," CP said in a statement on Thursday.

"CP would then acquire KCS shares and place them into the voting trust, at which point KCS shareholders will receive their consideration", Canadian Pacific said.

CP and its larger rival Canadian National are in race to take over KCS, which would create the first direct railway linking Canada, U.S. and Mexico.

CN said on Thursday that it was encouraged by the STB's decision to approve the voting trust and maintained that it had presented a better bid.

Last month, the U.S. STB granted a waiver to CP's $25 billion agreed bid for Kansas City Southern, which means the deal would not be subjected to the tougher railroad merger rules the regulator put in place in 2001.

CN said on April 20 it had offered to buy KCS railroad for about $33.7 billion.

(Reporting by Kanishka Singh in Bengaluru; Editing by Aurora Ellis)