CN (TSX: CNR, NYSE: CNI) today issued an open letter to the Kansas
City Southern (NYSE: KSU) (“KCS”) community regarding CN’s superior
proposal to combine with KCS. The letter outlines why a combined
CN-KCS represents the best solution for all stakeholders and sets
the record straight on the merits of CN’s proposal.
The following is a copy of the letter:
To the KCS Community,
At CN, we believe how you get there is just as
important as reaching your destination. On the railroad, that means
getting our customers’ freight from origin to destination safely,
cost-effectively and reliably, with respect for the environment and
the communities we serve. In business, it means dealing fairly and
honestly, with respect for people and processes.
We are in a spirited contest with Canadian
Pacific (CP) to acquire Kansas City Southern (KCS). We believe we
have a better bid than CP, that we can be a better partner to KCS
and all of its stakeholders, and that a combined CN-KCS represents
the best solution for shippers and the North American economy.
We also believe that the people who pay to move
freight on our rails should have a say in what happens here. That
is why we asked our industry regulator – the Surface Transportation
Board – to apply a higher “enhanced competition” standard of
regulatory review to our proposed transaction instead of the lower
pre-2001 standard CP asked for.
We want to know what customers think, and we are
confident they will like what they hear. Since launching our bid,
more than 600 customers, suppliers, port operators, elected
officials and other key stakeholders have written letters to the
STB in support of a CN-KCS combination.
Finally, we believe facts matter, and that good
processes lead to proper outcomes. And that is why we feel
compelled to set the record straight on some of the so-called
“truths” that CP has been promoting in an effort to muddy the water
on our clearly superior bid. So here are some facts:
- With more
choices comes more competition, lower costs and better service. A
CN-KCS combination will offer customers more connections and more
choices, with new access points and gateway options. This includes
an additional 22 Class 1 gateways, 5 ports and 10 barge terminals
for the supply chain of KCS customers. A combined CP-KCS offers
none of this.
- CN will preserve
all existing route choices. We are committed to preserving routing
options by keeping current gateways open and providing bottleneck
protections. This empowers customers to choose the best route and
carrier options for their needs.
- CN is creating
new shipping options. CP wants you to believe that a combined
CN-KCS would impair competition in north-south shipping. This
plainly isn’t true. A combined CN-KCS would compete with multiple
Class 1 railroads operating no less than six other north-south
routes, not to mention Mississippi River barge traffic and the
biggest freight carriers of all – truck traffic along Interstates
35 and 55.
- CN is committed
to Kansas City Southern – and to Kansas City. We have great respect
for KCS’s people, culture and history. We are committed to
maintaining CN’s U.S. headquarters in Kansas City, investing in the
communities we serve and working with KCS’s talented management
team to create good new jobs up and down the line.
- CN has committed
to implementing appropriate arrangements with its customers and the
STB to address any competitive concerns, including those that might
arise from the fact that 1% of a combined CN-KCS’s tracks would
overlap. At CN, we focus on solutions.
- CN has put
forward an identical voting trust structure to CP to ensure KCS
remains independent until regulators have approved whichever
transaction KCS ultimately chooses to pursue. We are confident the
STB will approve both voting trusts and put them on level ground so
that KCS shareholders can realize the best value for their
shares.
These are the facts. You can also read more
about this important transaction and our superior proposal at
www.ConnectedContinent.com.
CN has been a part of the fabric of the American
industrial heartland for decades, with the highly successful
acquisitions and integrations of Wisconsin Central, Illinois
Central, the EJ&E and other iconic U.S. railroads. We hope we
can count on your support so that CN and KCS together can embark on
the next phase of the process towards creating the premier railway
for the 21st century.
Respectfully,
JJ
RuestCEOCN |
Rob ReillyCOOCN |
For more information about CN’s superior
proposal to combine with KCS, please visit
www.ConnectedContinent.com.
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.
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 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 any
possible transaction between CN and KCS, including the possibility
that a transaction will not be agreed to or that the terms of any
definitive agreement will be materially different from those
described; uncertainties as to whether KCS will cooperate with CN
regarding the proposed transaction; 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.
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
ItThis news release relates to a proposal which CN has
made for an acquisition of KCS. In furtherance of this proposal and
subject to future developments, CN (and, if a negotiated
transaction is agreed, KCS) may file one or more registration
statements, proxy statements, tender offer statements or other
documents with the U.S. Securities and Exchange Commission (“SEC”)
or applicable securities regulators in Canada. This news release is
not a substitute for any proxy statement, registration statement,
tender offer statement, prospectus or other document CN and/or KCS
may file with the SEC or applicable securities regulators in Canada
in connection with the proposed transactions.
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.
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 and its
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. 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 www.sedar.com, as
applicable.
Contacts:
MediaCanadaMathieu 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.com |
Investment CommunityPaul
ButcherVice-PresidentInvestor Relations(514)
399-0052investor.relations@cn.ca |
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