Companies have submitted financial
documentation requested by STB in support of request for STB
approval of voting trust
CN and KCS one step closer to creating the
premier railway for the 21st century
Verified statement by KCS CFO Michael Upchurch
emphasizes that financial strength and viability of KCS will be
preserved during voting trust period
CN (TSX: CNR) (NYSE: CNI) and Kansas City Southern (NYSE: KSU)
(“KCS”) today announced that they have jointly filed with the
Surface Transportation Board (“STB”) certain documents requested by
the STB in its June 8, 2021, Decision in STB Finance Docket No.
36514 to enable the STB to review the voting trust in connection
with the definitive Merger Agreement between CN and KCS. These
documents include:
- Written opinions of the financial advisors referenced in
Section 4.16 of the Merger Agreement
- Debt Commitment Letters referenced in Section 4.17(a) of the
Merger Agreement, including all exhibits and schedules
- Section 5.1 of the Company Disclosure Schedules referenced in
Section 5.1(a) of the Merger Agreement, together with any other
section(s) of the Company Disclosure Schedules that pertain to the
Company Capital Allocation Policy referenced in Section 5.1(a) of
the Merger Agreement and/or the “[KCS] pre-existing capital
allocation policy” referenced in Applicants’ May 26 Motion
With this filing, CN and KCS are one step closer to creating the
premier railway for the 21st century. CN and KCS look forward to
the STB’s review and are confident that their voting trust will be
approved.
In response to the STB’s request for information about KCS’s
pre-existing capital allocation policy, CN and KCS also submitted
to the STB a Verified Statement from KCS Chief Financial Officer
Michael W. Upchurch. In his statement, Mr. Upchurch comments:
“The Board should expeditiously approve the CN voting trust. It
is the same as the already approved CP trust. It has the same
trustee. The Merger Agreement provides KCS with financial
flexibility and freedom to undertake its capital and maintenance
plans. Further, over 1400 stakeholders have supported the CN-KCS
combination so far.”
Mr. Upchurch’s statement emphasizes the financial strength of
KCS and its capital investment plans during the trust period:
KCS is financially strong:
“KCS compares very favorably to other Class I railroads in
almost every important financial measure including revenue growth,
operating ratio, EBITDA, EPS growth, free cash flow yields, debt
leverage ratio, liquidity, interest coverage ratio, and funds from
operations to debt ratio. Today, KCS generates substantially more
cash flow than is required for our annual investment needs. We have
more than sufficient access to capital to fund our three year
capital investment plan.”
CN-KCS Merger Agreement provides KCS with continued
flexibility to undertake its capital investment plans:
“The Merger Agreement provides KCS with financial flexibility
and freedom to undertake its capital and maintenance plans. The
Merger Agreement is designed to preserve KCS’s pre-existing capital
allocation policies during the trust period. It is also designed to
ensure that during the trust period KCS will continue to have the
freedom and the resources to pursue its existing and robust capital
expenditure program without interference from CN. During the trust
period, KCS will have substantial cash, liquidity and access to
capital markets not only to meet our planned investment
requirements consistent with the plan approved by our Board of
Directors previous to any merger agreement with either CP or CN,
but also the ability to far exceed that plan if it is necessary to
do so.”
As stated in the STB filing, the CN-KCS voting trust has been
designed to ensure KCS’s independence and freedom of action during
the trust period, and to give CN and KCS the opportunity during the
trust period to demonstrate the merits of the CN-KCS combination,
which will enhance competition; strengthen the North American rail
network; and provide better service and more choice for CN and KCS
customers. CN and KCS look forward to reviewing further public
comments and engagement during the STB’s official public comment
period, which will be open until June 28, 2021.
The filing made with the STB, as well as additional information
about CN’s pro-competitive combination with KCS, is available at
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.
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's 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 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’s
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’s results of operations appear in Part I, Item 1A “Risks
Related to KCS’s Operations and Business” of KCS’s Annual Report on
Form 10-K for the year ended December 31, 2020, and in KCS’s 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 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 will file 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 will include 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. This
news release is not a substitute for the proxy statement or
registration statement or other document 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 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. 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’s 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 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’s 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, 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 from www.sedar.com, as applicable.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210615005488/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
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