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 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 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 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, 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.
ParticipantsThis 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.
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
dburch@mackenziepartners.comlconnell@mackenziepartners.com |
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