CN (TSX: CNR, NYSE: CNI) and Kansas City Southern (NYSE: KSU)
(“KCS”) today announced that they have jointly filed with the
Surface Transportation Board (“STB”) certain documents requested by
the STB in its June 8, 2021, Decision in STB Finance Docket No.
36514 to enable the STB to review the voting trust in connection
with the definitive Merger Agreement between CN and KCS. These
documents include:
- Written opinions of the financial
advisors referenced in Section 4.16 of the Merger Agreement
- Debt Commitment Letters referenced
in Section 4.17(a) of the Merger Agreement, including all exhibits
and schedules
- Section 5.1 of the Company
Disclosure Schedules referenced in Section 5.1(a) of the Merger
Agreement, together with any other section(s) of the Company
Disclosure Schedules that pertain to the Company Capital Allocation
Policy referenced in Section 5.1(a) of the Merger Agreement and/or
the “[KCS] pre-existing capital allocation policy” referenced in
Applicants’ May 26 Motion
With this filing, CN and KCS are one step closer
to creating the premier railway for the 21st century. CN and KCS
look forward to the STB’s review and are confident that their
voting trust will be approved.
In response to the STB’s request for information
about KCS’s pre-existing capital allocation policy, CN and KCS also
submitted to the STB a Verified Statement from KCS Chief Financial
Officer Michael W. Upchurch. In his statement, Mr. Upchurch
comments:
“The Board should expeditiously approve the CN
voting trust. It is the same as the already approved CP trust. It
has the same trustee. The Merger Agreement provides KCS with
financial flexibility and freedom to undertake its capital and
maintenance plans. Further, over 1400 stakeholders have supported
the CN-KCS combination so far.”
Mr. Upchurch’s statement emphasizes the
financial strength of KCS and its capital investment plans during
the trust period:
KCS is financially strong: “KCS
compares very favorably to other Class I railroads in almost every
important financial measure including revenue growth, operating
ratio, EBITDA, EPS growth, free cash flow yields, debt leverage
ratio, liquidity, interest coverage ratio, and funds from
operations to debt ratio. Today, KCS generates substantially more
cash flow than is required for our annual investment needs. We have
more than sufficient access to capital to fund our three year
capital investment plan.”
CN-KCS Merger Agreement provides KCS
with continued flexibility to undertake its capital investment
plans:“The Merger Agreement provides KCS with financial
flexibility and freedom to undertake its capital and maintenance
plans. The Merger Agreement is designed to preserve KCS’s
pre-existing capital allocation policies during the trust period.
It is also designed to ensure that during the trust period KCS will
continue to have the freedom and the resources to pursue its
existing and robust capital expenditure program without
interference from CN. During the trust period, KCS will have
substantial cash, liquidity and access to capital markets not only
to meet our planned investment requirements consistent with the
plan approved by our Board of Directors previous to any merger
agreement with either CP or CN, but also the ability to far exceed
that plan if it is necessary to do so.”
As stated in the STB filing, the CN-KCS voting
trust has been designed to ensure KCS’s independence and freedom of
action during the trust period, and to give CN and KCS the
opportunity during the trust period to demonstrate the merits of
the CN-KCS combination, which will enhance competition; strengthen
the North American rail network; and provide better service and
more choice for CN and KCS customers. CN and KCS look forward to
reviewing further public comments and engagement during the STB’s
official public comment period, which will be open until June 28,
2021.
The filing made with the STB, as well as
additional information about CN’s pro-competitive combination with
KCS, is available at www.ConnectedContinent.com.
About CNCN is a world-class
transportation leader and trade-enabler. Essential to the economy,
to the customers, and to the communities it serves, CN safely
transports more than 300 million tons of natural resources,
manufactured products, and finished goods throughout North America
every year. As the only railroad connecting Canada’s Eastern and
Western coasts with the U.S. South through a 19,500-mile rail
network, CN and its affiliates have been contributing to community
prosperity and sustainable trade since 1919. CN is committed to
programs supporting social responsibility and environmental
stewardship.
About Kansas City
SouthernHeadquartered in Kansas City, Mo., Kansas City
Southern (KCS) (NYSE: KSU) is a transportation holding company that
has railroad investments in the U.S., Mexico and Panama. Its
primary U.S. holding is The Kansas City Southern Railway Company,
serving the central and south central U.S. Its international
holdings include Kansas City Southern de Mexico, S.A. de C.V.,
serving northeastern and central Mexico and the port cities of
Lázaro Cárdenas, Tampico and Veracruz, and a 50 percent interest in
Panama Canal Railway Company, providing ocean-to-ocean freight and
passenger service along the Panama Canal. KCS's North American rail
holdings and strategic alliances with other North American rail
partners are primary components of a unique railway system, linking
the commercial and industrial centers of the U.S., Mexico and
Canada. More information about KCS can be found at
www.kcsouthern.com
Forward Looking
StatementsCertain statements included in this news release
constitute “forward-looking statements” within the meaning of the
United States Private Securities Litigation Reform Act of 1995 and
under Canadian securities laws, including statements based on
management’s assessment and assumptions and publicly available
information with respect to KCS, regarding the proposed transaction
between CN and KCS, the expected benefits of the proposed
transaction and future opportunities for the combined company. By
their nature, forward-looking statements involve risks,
uncertainties and assumptions. CN cautions that its assumptions may
not materialize and that current economic conditions render such
assumptions, although reasonable at the time they were made,
subject to greater uncertainty. Forward-looking statements may be
identified by the use of terminology such as “believes,” “expects,”
“anticipates,” “assumes,” “outlook,” “plans,” “targets,” or other
similar words.
Forward-looking statements are not guarantees of
future performance and involve risks, uncertainties and other
factors which may cause actual results, performance or achievements
of CN, or the combined company, to be materially different from the
outlook or any future results, performance or achievements implied
by such statements. Accordingly, readers are advised not to place
undue reliance on forward-looking statements. Important risk
factors that could affect the forward-looking statements in this
news release include, but are not limited to: the outcome of the
proposed transaction between CN and KCS; the parties’ ability to
consummate the proposed transaction; the conditions to the
completion of the proposed transaction; that the regulatory
approvals required for the proposed transaction may not be obtained
on the terms expected or on the anticipated schedule or at all;
CN’s indebtedness, including the substantial indebtedness CN
expects to incur and assume in connection with the proposed
transaction and the need to generate sufficient cash flows to
service and repay such debt; CN’s ability to meet expectations
regarding the timing, completion and accounting and tax treatments
of the proposed transaction; the possibility that CN may be unable
to achieve expected synergies and operating efficiencies within the
expected time-frames or at all and to successfully integrate KCS’s
operations with those of CN; that such integration may be more
difficult, time-consuming or costly than expected; that operating
costs, customer loss and business disruption (including, without
limitation, difficulties in maintaining relationships with
employees, customers or suppliers) may be greater than expected
following the proposed transaction or the public announcement of
the proposed transaction; the retention of certain key employees of
KCS may be difficult; the duration and effects of the COVID-19
pandemic, general economic and business conditions, particularly in
the context of the COVID-19 pandemic; industry competition;
inflation, currency and interest rate fluctuations; changes in fuel
prices; legislative and/or regulatory developments; compliance with
environmental laws and regulations; actions by regulators; the
adverse impact of any termination or revocation by the Mexican
government of KCS de México, S.A. de C.V.’s Concession; increases
in maintenance and operating costs; security threats; reliance on
technology and related cybersecurity risk; trade restrictions or
other changes to international trade arrangements; transportation
of hazardous materials; various events which could disrupt
operations, including illegal blockades of rail networks, and
natural events such as severe weather, droughts, fires, floods and
earthquakes; climate change; labor negotiations and disruptions;
environmental claims; uncertainties of investigations, proceedings
or other types of claims and litigation; risks and liabilities
arising from derailments; timing and completion of capital
programs; and other risks detailed from time to time in reports
filed by CN with securities regulators in Canada and the United
States. Reference should also be made to Management’s Discussion
and Analysis in CN’s annual and interim reports, Annual Information
Form and Form 40-F, filed with Canadian and U.S. securities
regulators and available on CN’s website, for a description of
major risk factors relating to CN. Additional risks that may affect
KCS’s results of operations appear in Part I, Item 1A “Risks
Related to KCS’s Operations and Business” of KCS’s Annual Report on
Form 10-K for the year ended December 31, 2020, and in KCS’s other
filings with the U.S. Securities and Exchange Commission
(“SEC”).
Forward-looking statements reflect information
as of the date on which they are made. CN assumes no obligation to
update or revise forward-looking statements to reflect future
events, changes in circumstances, or changes in beliefs, unless
required by applicable securities laws. In the event CN does update
any forward-looking statement, no inference should be made that CN
will make additional updates with respect to that statement,
related matters, or any other forward-looking statement.
No Offer or SolicitationThis
news release does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval, nor shall there be any sale of securities in
any jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offer of securities
shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as
amended.
Additional Information and Where to Find
ItIn connection with the proposed transaction, CN will
file with the SEC a registration statement on Form F-4 to register
the shares to be issued in connection with the proposed
transaction. The registration statement will include a preliminary
proxy statement of KCS which, when finalized, will be sent to the
stockholders of KCS seeking their approval of the merger-related
proposals. This news release is not a substitute for the proxy
statement or registration statement or other document CN and/or KCS
may file with the SEC or applicable securities regulators in Canada
in connection with the proposed transaction.
INVESTORS AND SECURITY HOLDERS ARE URGED TO READ
THE PROXY STATEMENT(S), REGISTRATION STATEMENT(S), TENDER OFFER
STATEMENT, PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS FILED WITH
THE SEC OR APPLICABLE SECURITIES REGULATORS IN CANADA CAREFULLY IN
THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION ABOUT CN, KCS AND THE PROPOSED
TRANSACTIONS. Any definitive proxy statement(s), registration
statement or prospectus(es) and other documents filed by CN and KCS
(if and when available) will be mailed to stockholders of CN and/or
KCS, as applicable. Investors and security holders will be able to
obtain copies of these documents (if and when available) and other
documents filed with the SEC and applicable securities regulators
in Canada by CN free of charge through at www.sec.gov and
www.sedar.com. Copies of the documents filed by CN (if and when
available) will also be made available free of charge by accessing
CN’s website at www.CN.ca. Copies of the documents filed by KCS (if
and when available) will also be made available free of charge at
www.investors.kcsouthern.com, upon written request delivered to KCS
at 427 West 12th Street, Kansas City, Missouri 64105, Attention:
Corporate Secretary, or by calling KCS’s Corporate Secretary’s
Office by telephone at 1-888-800-3690 or by email at
corpsec@kcsouthern.com.
ParticipantsThis news release
is neither a solicitation of a proxy nor a substitute for any proxy
statement or other filings that may be made with the SEC and
applicable securities regulators in Canada. Nonetheless, CN, KCS,
and certain of their directors and executive officers and other
members of management and employees may be deemed to be
participants in the solicitation of proxies in respect of the
proposed transactions. Information about CN’s executive officers
and directors is available in its 2021 Management Information
Circular, dated March 9, 2021, as well as its 2020 Annual Report on
Form 40-F filed with the SEC on February 1, 2021, in each case
available on its website at www.CN.ca/investors/ and at www.sec.gov
and www.sedar.com. Information about KCS’s directors and executive
officers may be found on its website at www.kcsouthern.com and in
its 2020 Annual Report on Form 10-K filed with the SEC on January
29, 2021, available at www.investors.kcsouthern.com and
www.sec.gov. Additional information regarding the interests of such
potential participants will be included in one or more registration
statements, proxy statements, tender offer statements or other
documents filed with the SEC and applicable securities regulators
in Canada if and when they become available. These documents (if
and when available) may be obtained free of charge from the SEC’s
website at www.sec.gov and from www.sedar.com, as applicable.
Contacts:
Media: CNCanadaMathieu
GaudreaultCN Media Relations & Public Affairs(514)
249-4735Mathieu.Gaudreault@cn.ca Longview Communications &
Public AffairsMartin Cej (403) 512-5730 mcej@longviewcomms.ca
United StatesBrunswick GroupJonathan Doorley /
Rebecca Kral(917) 459-0419 / (917)
818-9002jdoorley@brunswickgroup.comrkral@brunswickgroup.comMedia:
KCSC. Doniele CarlsonKCS Corporate Communications &
Community Affairs(816) 983-1372dcarlson@kcsouthern.com Joele Frank,
Wilkinson Brimmer KatcherTim Lynch / Ed Trissel(212) 355-4449 |
Investment Community: CNPaul
ButcherVice-PresidentInvestor Relations(514)
399-0052investor.relations@cn.caInvestment Community:
KCSAshley ThorneVice PresidentInvestor Relations(816)
983-1530athorne@kcsouthern.comMacKenzie Partners, Inc.Dan Burch /
Laurie Connell(212) 929-5748 / (212) 378-7071 |
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