CN (TSX: CNR, NYSE: CNI) today announced that following the
completion of confirmatory due diligence, it submitted an enhanced
binding superior proposal and merger agreement to the Kansas City
Southern (NYSE: KSU) (“KCS”) Board of Directors. The KCS Board has
determined CN’s proposal to be a “Company Superior Proposal” and
has announced its intention to terminate the previously executed
March 21, 2021 merger agreement with Canadian Pacific Railway
Limited (TSX: CP, NYSE: CP) (“CP”). CN looks forward to promptly
entering into a definitive merger agreement with KCS to create the
premier railway for the 21st century.
CN’s proposal offers KCS shareholders $325 per
common share based on yesterday’s closing price of CN shares, which
implies a total enterprise value of $33.6 billion, including the
assumption of approximately $3.8 billion of KCS debt. Under the
terms of CN’s revised proposal, KCS shareholders will receive $200
in cash and 1.129 shares of CN common stock for each KCS common
share, with KCS shareholders expected to own 12.6% of the combined
company. This represents an implied premium of 45% when compared to
KCS’ unaffected closing stock price on March 19, 2021. KCS’
preferred shareholders will continue to receive $37.50 in cash for
each preferred share. Under the terms of the revised proposal, a
wholly owned subsidiary of CN has also agreed to reimburse $700
million to KCS in connection with their payment of the termination
fee to CP under the merger agreement with CP.
“We are delighted that KCS has deemed CN’s
binding proposal superior, recognizing the many compelling benefits
of our combination and expressing confidence in CN’s ability to
obtain the necessary approvals and successfully close the
transaction. Our proposal offers a clear path to completion and is
structured in a way that gives KCS shareholders both greater
immediate value and the opportunity to participate in the future
upside of the combined company. Together, CN and KCS will
seamlessly connect ports and rails in the United States, Mexico and
Canada by providing superior service, enhanced competition and new
market access to move goods across North America safely and
efficiently. We are encouraged by the widespread support we have
received for the transaction thus far and will continue to work
closely with KCS and all relevant stakeholders to fully realize the
benefits and opportunities available through a combined
CN-KCS.”
- JJ Ruest, president and chief executive
officer of CN
“We are the better bid, better partner, better
railway and best solution for KCS, and are pleased that the KCS
Board of Directors has recognized the superiority of our proposal.
We look forward to continuing to engage constructively with KCS’
Board to execute a definitive merger agreement in the near term and
deliver the benefits of this transaction to both companies’
stakeholders.”
- Robert Pace, Chair of the Board of CN
The combination of CN and KCS will:
- Create the premier railway
for the 21st century:
The combination of CN and KCS will further accelerate CN’s
industry-leading growth profile by connecting North America’s
industrial corridor to create new options for shippers and new
revenue for the combined company. A CN-KCS combination is the right
solution to bring the USMCA to life in a meaningful way.
- Have strong stakeholder
support. CN has received more than 1,000 letters of
support from customers, partners and elected officials since it
first made its proposal; this is nearly double the number of
support letters filed by CP, in less than half the time.
- Be
pro-competitive: CN and KCS will create a safer, faster,
cleaner and stronger railway that is ideally positioned to support
the growth of an emerging consumption-based economy through better
service options and customer choice. Specifically, this combination
will create an express route that connects the U.S., Mexico and
Canada with a seamless single-owner, single-operator service, and
preserve access to all existing gateways to enhance route choices
and ensure robust price competition.
- Accelerate innovation and
environmental efficiency: CN and KCS share cultures that
are committed to safety, service and environmental stewardship. CN
and KCS will accelerate innovation and investment as CN brings its
industry-leading safety technology and fuel efficiency to the KCS
network. The combined company will yield demonstrable benefits for
the environment across the states and regions traversed by KCS’
tracks by converting significant volumes of truck traffic onto
rails, which deliver better fuel efficiency at lower cost. Expected
conversion of truck traffic to rails will also reduce traffic
congestion in these regions and prevent thousands of tons of
emissions from entering the atmosphere every day.
- Have a clear path to
close: CN is confident in its ability to obtain approval
from the Surface Transportation Board (“STB”) and other regulatory
bodies on a timeline consistent with the proposed CP transaction.
CN has proposed to use a voting trust and trustee that are
identical to those the STB approved for CP’s proposed acquisition.
KCS shareholders will receive the merger consideration immediately
upon the closing of CN’s voting trust, which is expected to be in
the second half of 2021. Moreover, CN’s proposed transaction will
not require the approval of CN’s shareholders, eliminating a
closing condition present in the proposed CP transaction and
thereby providing greater certainty of closing. The completion of
the transaction would be expected to take place in the second half
of 2022.
For more information about CN’s superior
proposal to combine with KCS, please visit
www.ConnectedContinent.com.
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.
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 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; 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.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.com |
Investment CommunityPaul
ButcherVice-PresidentInvestor Relations(514)
399-0052investor.relations@cn.ca |
__________________________
1 All figures in U.S. dollars, except where noted. All
conversions between Canadian dollars and U.S. dollars are based on
a 0.827 foreign exchange rate as of May 12, 2021. Where applicable,
figures are based on CN and CP closing share prices on the NYSE of
$110.76 and $391.87, respectively, as of May 12, 2021.
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