Unprecedented pro-competitive commitments will
enhance route choice and provide all market participants, railroads
and shippers a fair chance to compete
Transaction is about creating a new rail
product and pro-competitive market philosophy for the future
New direct rail service, preserving interline
routing options with the gateway commitment, and offering price
transparency through separately challengeable segment rates will
deliver on commitment to preserve and enhance competition for all
shippers
CN (TSX: CNR) (NYSE: CNI) and Kansas City Southern (NYSE: KSU)
(“KCS”) today outlined how the proposed combination of CN and KCS
will preserve and promote competition, growth and more choice for
rail customers, port operators, employees, stakeholders and
communities.
As outlined in the joint filing to the Surface Transportation
Board (“STB”) on July 6, 2021, CN and KCS will enhance competition
by:
Delivering more choices to our rail customers: The
combination allows shippers the ability to connect with other Class
I carriers up and down the combined network so that a shipper can
use the most efficient and lowest cost gateway and routing options
available for a particular move. The combined network will connect
with partner Class Is at numerous major gateways, providing
unprecedented choice, resiliency and flexibility. More choice tilts
negotiations in the customer’s favor. The proposed CN-KCS
combination makes that possible.
Keeping gateways open on commercially reasonable terms:
CN and KCS are committed to keeping CN and KCS major rail gateways
open both physically and commercially. This means, for example,
that agricultural customers, including farmer-owned co-operatives
enjoying existing competitive joint line routings through gateways
with CN or KCS and another carrier, will continue to have those
routings available upon completion of the merger. Everyone benefits
from this commitment. Customers will continue to enjoy the
interline service they have today, along with new, enhanced
rail-to-rail competition that the combination would make possible.
And by creating more optionality through major gateways, we will
offer customers a new ability to shop for the best price and
service combination.
Using confidential, voluntary, binding arbitration to enforce
the gateway commitment: CN and KCS will offer voluntary,
confidential, binding arbitration to permit quick resolution of any
commercial dispute over the gateway commitment with our
customers.
Creating greater price transparency: We are talking with
our customers about a binding merger commitment in which, upon
request from a customer, a combined CN-KCS will offer a separate
segment rate for the CN-KCS portion of a movement, in addition to a
through rate for the entire movement. This commitment to price
transparency will enhance competition throughout the rail industry.
With more transparency, each carrier in a move will need to justify
its price, escalation and service, which will foster greater
rail-to-rail competition.
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.”
The CN-KCS combination will create a more competitive
marketplace that will attract more freight to rail and will expand
North American trade and power economic prosperity, provide
numerous new connections and service options for customers, as well
as deliver many compelling and innovative benefits for ports,
employees and communities.
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 is also available on this site.
About CN
CN 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 Southern
Headquartered 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 Statements
Certain 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 CN and 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 and KCS caution that their
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 and KCS assume 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 or KCS does update any
forward-looking statement, no inference should be made that CN or
KCS will make additional updates with respect to that statement,
related matters, or any other forward-looking statement.
No Offer or Solicitation
This 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 It
In 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, and the
registration statement has been declared effective. CN has filed
with the SEC its prospectus and KCS has filed with the SEC its
definitive proxy statement in connection with the proposed
transaction, and the KCS proxy statement is being sent to the
stockholders of KCS seeking their approval of the merger-related
proposals. This news release is not a substitute for the
registration statement, the prospectus, the proxy 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
REGISTRATION STATEMENT, THE PROSPECTUS, THE PROXY STATEMENT 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 CONTAIN AND WILL CONTAIN
IMPORTANT INFORMATION ABOUT CN, KCS AND THE PROPOSED TRANSACTION.
Investors and security holders may 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.
Participants
This news release is neither a solicitation of a proxy nor a
substitute for the registration statement, the prospectus, the
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 transaction. 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 is or may be included in the registration
statement, the prospectus, the proxy statement 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210708005965/en/
Media: CN Canada
Mathieu Gaudreault CN Media Relations & Public Affairs (514)
249-4735 Mathieu.Gaudreault@cn.ca Longview Communications &
Public Affairs Martin Cej (403) 512-5730 mcej@longviewcomms.ca
United States Brunswick Group Jonathan Doorley / Rebecca
Kral (917) 459-0419 / (917) 818-9002 jdoorley@brunswickgroup.com
rkral@brunswickgroup.com Media:
KCS C. Doniele Carlson KCS Corporate Communications
& Community Affairs (816) 983-1372 dcarlson@kcsouthern.com
Joele Frank, Wilkinson Brimmer Katcher Tim Lynch / Ed Trissel (212)
355-4449
Investment Community: CN
Paul Butcher Vice-President Investor Relations (514) 399-0052
investor.relations@cn.ca Investment
Community: KCS Ashley Thorne Vice President Investor
Relations (816) 983-1530 athorne@kcsouthern.com MacKenzie Partners,
Inc. Dan Burch / Laurie Connell (212) 929-5748 / (212) 378-7071
dburch@mackenziepartners.com lconnell@mackenziepartners.com
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