CN (TSX: CNR, NYSE: CNI) and Kansas City Southern (NYSE: KSU)
(“KCS”) today highlighted the benefits realized by grain customers,
including farmer-owned grain co-operatives, through CN’s open
gateways commitment in the CN-KCS combination. These stakeholders,
including agricultural customers in the Upper Midwestern U.S.,
would benefit from a choice of routes and competitive rates, better
service and innovation resulting from the competition for their
business.
“CN’s commitment to keep gateways open on
commercially reasonable terms means that agricultural customers,
including farmer-owned co-operatives, enjoying competitive joint
line routings with CN or KCS, will continue to have those routings
available upon completion of the merger,” said James Cairns, CN’s
Senior Vice President, Rail Centric Supply Chain. “This commitment
assures grain customers shipping over CP lines to Kansas City and
beyond will continue to enjoy the interline service they have
today, along with new, enhanced rail-to-rail competition. However,
for these benefits to be realized, the CN voting trust must be
approved by the Surface Transportation Board (“STB”).”
In an op-ed published by Railway Age on June
22nd, Dr. William Huneke, the former Director of the Office of
Economics and Chief Economist at STB described CN’s open gateways
commitment as a “big deal,” stating:
- “This commitment ensures that
shippers who today enjoy competitive joint line routings with
either CN or KCS will continue to have those routings available to
them in a post CN/KCS merger environment, even if a merged CN/KCS
could handle the entire movement via a single-line routing.”
- “This means continued competition,
and we know that competition encourages lower rates, better service
and innovation.”
- “The commitment is not just about
maintaining physical routings, but also about ensuring that the
routings are commercially reasonable to the shipper. What is meant
by “open on commercially reasonable terms”? This means all market
participants, railroads and shippers will benefit: They will get a
fair chance to compete. They will pay and receive remunerative
rates and get efficient service. If a shipper is not happy with
their service, they can switch to another carrier because they will
still have a choice.”
- “A CN/KCS combination will create a
strong new rail-to-rail competitor that will provide new
single-line rail movements in competition with other rail carriers.
In addition, with the gateway commitment, shippers will also have
the option to use an existing routing or other routings involving
more than just the merged CN/KCS.”
More than 1,500 letters in support of the CN-KCS
combination have been sent to CN and KCS and filed with the STB
from customers, suppliers, elected officials and other
stakeholders. A list of our supporters can be found at
www.ConnectedContinent.com.
For the combination of KCS and CN to proceed,
the STB must first approve the use of a voting trust. CN’s plain
vanilla voting trust, which is identical to the CP trust approved
for use by the STB, is an integral component of the CN-KCS
combination. It prevents premature control of KCS, allows KCS to
maintain independence and protects KCS’ financial health during the
STB’s review of the ultimate combination of CN and KCS.
Additionally, CN has committed to divesting the sole area of
overlap between the CN and KCS networks – KCS’ 70-mile line between
New Orleans and Baton Rouge – thereby making the combination a true
end-to-end transaction, and has agreed to preserve existing route
options by keeping gateways open on commercially reasonable terms.
The proposed CN-KCS combination represents a procompetitive
solution that offers unparalleled opportunities for customers,
employees, shareholders, the environment and the North American
economy.
For more information on CN’s pro-competitive
combination with KCS, please visit www.ConnectedContinent.com.
About Dr. HunekeDr. Huneke is
former Director of the Office of Economics and Chief Economist at
the Surface Transportation Board. He is now a consulting economist
and provides economic advice to private sector clients. He has
provided testimony and litigation advice to Class I railroads,
including KCS, and to the American Short Line and Regional
Railroads Association.
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' 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’
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’ results of operations appear in Part I, Item 1A “Risks Related
to KCS’ Operations and Business” of KCS’ Annual Report on Form 10-K
for the year ended December 31, 2020, and in KCS’ 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 has filed 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 includes 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. The
registration statement has not yet become effective. This news
release is not a substitute for the proxy statement or registration
statement or other documents 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 PRELIMINARY PROXY STATEMENT, THE REGISTRATION STATEMENT, THE
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 (INCLUDING ALL
AMENDMENTS AND SUPPLEMENTS THERETO) 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’ 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’ 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 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.com MacKenzie Partners, Inc.Dan Burch /
Laurie Connell(212) 929-5748 / (212) 378-7071 |
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