CN (TSX: CNR, NYSE: CNI) and Kansas City Southern (NYSE: KSU)
(“KCS”) today noted that the Surface Transportation Board’s (“STB”)
comment period regarding the companies’ application for approval of
a voting trust has closed, marking another key step toward creating
the premier railway for the 21st century through the end-to-end,
pro-competitive combination of the two companies.
The plain vanilla voting trust proposed by CN
and KCS, which is identical to the CP trust approved by the STB,
meets the test for approval: (a) it prevents premature control of
KCS; (b) it allows KCS to maintain independence during the STB’s
review of the ultimate combination of CN and KCS; and (c) it
protects KCS’ financial health during this period. It also enables
KCS shareholders to realize the full value of their shares prior to
the STB’s subsequent review of the merits of the proposed
combination.
Former STB Commissioner and Vice-Chairman,
William Clyburn, Jr., wrote in a Railway Age op-ed dated June 10
that he believes the CN voting trust addresses “unlawful control”
and the “public interest” under the new rules, and that as such,
the voting trust should be approved.
Further, approval of the CN-KCS proposed voting
trust is the essential next step for shippers and others to have
their say during the Board’s consideration of what constitutes
enhanced competition during its review of the merits of the
combination. Without approval of the CN-KCS voting trust creating a
level playing field with CP’s voting trust, shippers will not be
able to discuss what constitutes enhanced competition or realize
the benefits of this proposed, new, pro-competitive, single line
rail-to-rail competition combination.
Benefits to shippers were highlighted in an
op-ed authored by Dr. William Huneke, the former Director of the
Office of Economics and Chief Economist at the STB, and published
by Railway Age on June 22. Dr. Huneke 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.”
CN and KCS are pleased that so many stakeholders
participated in the process and note the 1,700 support letters
filed with the STB. Importantly, 967 of the persons who filed
letters specifically request that the STB approve the proposed
voting trust agreement.
Among those who filed letters of support include
Congressman Sam Graves of Missouri, the Ranking Member of the House
Committee on Transportation and Infrastructure. Representative
Graves, “…urge[s] approval of the voting trust,” and notes that “…
merging with CN will create new opportunities for trade and
economic growth in the [Kansas City] metro area and beyond. From a
national and international perspective, the CN/KCS merger has the
potential to improve commerce and access to markets by creating a
single railroad that will streamline the movement of goods among
Canada, the United States, and Mexico.” Additionally, Congressman
Bennie Thompson of Mississippi, the Chairman of the House Homeland
Security Committee, filed a letter of support for the approval of
the voting trust, noting that the combination, “…will strengthen
competition by adding a stronger rail competitor in the north-south
lanes in the industrial center of the country and opens markets
with new single-line hauls, creating more efficient movements among
Canada, the United States, and Mexico…The voting trust should be
approved so the Board and the public may move forward to consider
the merits of the transaction.”
In addition, short line railroad Genesee &
Wyoming Inc. (“G&W”) also filed a letter stating that it,
“…supports the proposed use of a voting trust by CN,” and noting
that G&W, “…has used voting trusts before and recognizes the
benefits to the freight rail industry associated with the voting
trust process.”
CN and KCS also note the four letters of support
for CN and KCS’ voting trust from three local unions affiliated
with Brotherhood of Locomotive Engineers and Trainmen (“BLET”), who
collectively represent over 1,700 locomotive engineers working on
CN’s United States rail operating subsidiaries and approximately
200 engineers working on KCS; International Brotherhood of
Boilermakers (“IBB”), one of the oldest unions in the United States
representing more than 50,000 skilled craftsmen and craftswomen and
industrial workers throughout the United States and Canada; and
from officers including the General Chairmen of SMART-TD General
Committees of Adjustment 377, 433 and 987, which collectively
represent over 1,800 conductors on CN’s United States rail
operating subsidiaries.
Additional supporters are elected officials and
local leadership, including Governor Mike Parson of Missouri;
Governor Asa Hutchinson of Arkansas; Governor John Bel Edwards of
Louisiana; Congressmen Jerry Carl of Alabama, Danny Davis of
Illinois, Jack Bergman of Michigan, Joe Wilson of South Carolina
and Steve Cohen of Tennessee; Mayor Sharon Broome of Baton Rouge;
Mayor Quinton Lucas of Kansas City, Missouri; and Chief Gary Batton
of the Choctaw Nation of Oklahoma; major customers, including grain
customers benefitting from our open gateways commitment and
partners from various segments of the economy such as MS Worldwide
Logistics, Inc., Ray-Carroll County Grain Growers, Raeford Farms
and Port of Mobile; and local cities and Chambers of Commerce in
partnership with CN or KCS, including the City of Winnsboro, Texas
and the Baton Rouge Area Foundation.
A full list of our supporters can be found at
www.ConnectedContinent.com.
Consistent with the timeline that the STB has
set for reviewing the voting trust, CN and KCS will review all
comments submitted and file their response on July 6, 2021.
“We believe that the STB should approve our
voting trust, which is identical to the CP voting trust already
approved by the Board, so that we can proceed with a full
substantive review of the many compelling and innovative
pro-competitive benefits this combination will provide for
customers, ports, employees and communities. The public comment
period allowed the STB to hear from key stakeholders about the
tremendous public interest benefits a CN-KCS combination will bring
by creating the premier railway for the 21st century with a single
network across Canada, the United States and Mexico. We look
forward to continuing to explain how this combination will enhance
competition, facilitate North American trade and provide
significant environmental benefits during the Board’s upcoming
consideration of the merits of the combination. Approval of our
voting trust allows that discussion with the Board and shippers to
proceed.”
- JJ Ruest, president and chief executive
officer of CN
“The proposed combination has received
broad-based support from across the CN and KCS stakeholder network
because the plain vanilla voting trust makes very clear that a
CN-KCS combination is in the public interest and will prevent
unlawful control of KCS prior to the STB’s final merger approval.
Our combination will help North America’s industrial corridor while
also enhancing competition and boosting the economies of all three
countries.”
- Patrick J. Ottensmeyer, president and chief
executive officer of KCS
CN and KCS have already committed to taking
steps to ensure the pro-competitive nature of their combination.
Specifically, CN will divest 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. CN has also agreed to preserve existing route options
by keeping gateways open on commercially reasonable terms. The
proposed CN-KCS combination represents a pro-competitive solution
that offers unparalleled opportunities for customers, employees,
shareholders, the environment and the North American economy.
Additional information about CN’s
pro-competitive combination with KCS is available at
www.ConnectedContinent.com. CN’s and KCS’ July 6, 2021 STB filing
will also be made available on this site.
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.caLongview Communications &
Public AffairsMartin Cej (403) 512-5730
mcej@longviewcomms.caUnited 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.comJoele Frank,
Wilkinson Brimmer KatcherTim Lynch / Ed Trissel(212) 355-4449 |
Investment Community: CNPaul
ButcherVice-PresidentInvestor Relations(514)
399-0052investor.relations@cn.ca Investment 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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