Canada hikes ownership limit for Bill Gates-backed CN Rail
The Canadian government is lifting ownership restrictions for Canadian National Railway Co. and major airlines like Air Canada, among a series of steps to open up competition in the country’s transport sector.
The changes, unveiled in a law proposed Tuesday, would lift individual share ownership limit for Canadian National, Canada’s largest railroad, to 25 percent from the current 15 percent. Changes to airline rules also opened the door to joint ventures and codified a previously announced hike in the foreign ownership limit of foreign carriers, to 49 percent from 25 percent.
“It was a reasonable thing to increase that to 25 percent,” Transport Minister Marc Garneau said at a press conference in Ottawa. “We felt that this wasn’t fair to CN.”
Bill Gates, the railway company’s biggest single shareholder, is among those that could benefit from the changes. Wheat growers expect the new rules to boost services available to them.
Canada’s transport sector is saddled by legacy issues stemming from the government’s heavy involvement in the industry, including ownership of both Canadian National and Air Canada until recently and restrictions to competition.
The transport bill also includes changes to so-called inter-switching rules for railways – where a shipper, such as a farmer, can use two railways to ship their goods – a move that will partially open Canada to US competitors. The new regime essentially expands the roster of shippers who are eligible to take part, while asking them to apply instead of automatically getting approval.
Market reaction While some stakeholders withheld reaction as they reviewed the complex series of rail changes, CN criticized the inter-switching changes.
“Our initial view is that long haul inter-switching may have unintended consequences with respect to investment and could give US railways access to the Canadian market at regulated rates – without reciprocity,” Chief Executive Officer Luc Jobin said in a written statement.
Shares moved on the announcement. Air Canada gained 5 percent, at one point reaching its highest level since November 2007, and WestJet Airlines Ltd. rose 2.5 percent. CN initially gained 1 percent but quickly reversed direction, closing down 0.7 percent in Toronto.