CORRECTED-UPDATE 1-U.S. regulator gives CP Railway early win as Kansas City Southern review continues

(Corrects that STB decision is to uphold waiver, not approve merger)

April 24 (Reuters) - Canadian Pacific Railway Ltd on Saturday welcomed the U.S. Surface Transportation Board’s (STB) decision to uphold a 2001 waiver it granted to Kansas City Southern being applicable to the merger of the two companies.

The two companies will proceed with an application under the standards in the STB’s pre-2001 major merger rules, according to a statement by Canadian Pacific.

The STB, charged with the economic regulation of various modes of surface transportation, primarily freight rail, 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.

The STB updated its merger regulations in 2001 to introduce a requirement that Class I railways in the United States have to show a deal is in the public interest.

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.

CP had agreed to buy Kansas City Southern in a $25 billion cash-and-stock deal to create the first railway spanning the United States, Mexico and Canada in March.

Canadian National Railway Co made a competing bid of $33.7 billion for Kansas City Southern on Tuesday , after which CP said it will not raise its bid. Its Chief Executive Keith Creel said that bigger rival Canadian National’s offer is “not a real deal.”

Reporting by Juby Babu in Bengaluru; editing by Diane Craft and Marguerita Choy