CN-KCS STB filing meets the unlawful control
and public interest tests of the STB
CN and KCS note overwhelming support for voting
trust and pro-competitive combination from more than 30 elected
officials, including Congressmen Sam Graves and Bennie Thompson
At end of comment period, 1,752 letters of
support were filed with the STB, including more than 1,000 letters
of support for the voting trust
CN (TSX: CNR) (NYSE: CNI) and Kansas City Southern (NYSE: KSU)
(“KCS”) yesterday made a joint submission to the Surface
Transportation Board (“STB”) that explains why the STB should
approve CN’s voting trust structure, which is a critical step
toward full STB review on the merits of the proposed CN-KCS
combination. This submission closes the record on the voting trust
for the CN-KCS combination, and we await the STB’s decision.
Over 1,750 letters of support have been filed with the STB,
including more than 1,000 specifically requesting approval of the
proposed voting trust, which is an important component of the
CN-KCS combination. The voting trust prevents unlawful and
premature control of KCS, allows KCS to maintain independence and
protects KCS’ financial health during the STB’s review of the
ultimate combination of CN and KCS – all while CN remains
financially strong.
The confidence CN and KCS have in the strength of their case is
supported by the views of industry experts. Former STB Commissioner
and Vice-Chairman William Clyburn, Jr. wrote in a Railway Age op-ed
dated June 10 that he believes the CN voting trust addresses
“unlawful control” and the “public interest” standard under the new
rules, and that as such, the voting trust should be approved.
The proposed combination will establish seamless, single-line
service from Canada, through the United States and into Mexico. The
end-to-end CN-KCS combination will expand North American trade and
power economic prosperity, provide numerous new connections and
service options for customers, and deliver many compelling and
innovative benefits for ports, employees and communities.
“We are excited about this combination because of its potential
to promote competition, growth and more choice for rail customers,
port operators, employees, stakeholders and communities. It will
also provide significant environmental benefits for North American
communities. We are confident that our voting trust meets all the
standards set forth by the STB and believe that, after a fair and
thorough review by the STB, it should be approved.”
- JJ Ruest, president and chief executive officer of CN
“CN is the ideal partner for KCS to power the resurgence of
North America’s industrial and agricultural corridors and enhance
competition. It is important that the STB approve CN’s voting trust
so that the STB can receive the formal merger application and
proceed with a full substantive review of the many compelling and
innovative pro-competitive benefits this combination will provide
for the public.”
- Patrick J. Ottensmeyer, president and chief executive officer
of KCS
CN and KCS Address Claims Raised During Comment
Period
Proposed Voting Trust Agreement
Protects KCS
KCS maintains full independence and ability to execute its
planned capital program while in trust
While KCS is in the voting trust, KCS will be managed day-to-day
by KCS’ existing management team and board, overseen by an
independent trustee with extensive knowledge of KCS. It will retain
both full independence and the ability to increase capital
investments beyond its planned capital program.
Under the voting trust, the STB has oversight over any
divestiture of KCS, if necessary, and CN has committed to the STB
that if it is required to divest KCS out of trust, it would
instruct the trustee to divest KCS in a way that maintains KCS as
an intact entity.
CN and KCS Will Enhance
Competition
Commitments provide new options to customers
CN and KCS chose to have their merger reviewed by the STB under
the current merger rules knowing that it means the proposal will
have to meet a higher standard of “enhanced competition.” The
decision was made because customers should have a say and the
commitments CN has made can and will enhance competition in many
different ways.
CN has committed to divesting the sole area of overlap between
the CN and KCS networks – KCS’ 70-mile line between New Orleans and
Baton Rouge – thereby making the combination a true end-to-end
transaction.
CN and KCS are also committed to preserving access to all major
gateways on commercially reasonable terms. This commitment enhances
route choice and provides all market participants, railroads and
shippers a fair chance to compete.
How this works is that customers enjoying competitive joint line
routings with CN or KCS to gateways, in cities such as New Orleans,
St. Louis and Kansas City, will continue to have those routings
available upon completion of the merger. These customers keep the
interline service options they have today and add to those choices
new, enhanced single-line service. The gateway commitment is about
providing greater choices to customers and it will extend to all
major U.S. gateways served by CN and KCS today.
As outlined in the joint filing, CN and KCS have committed to
further enhance competition by providing customers with increased
pricing transparency. Customers benefit from this transparency
because it offers negotiating leverage.
The unparalleled pro-competitive benefits are clear upon a
review of the North-South trade routes through the industrial and
agricultural corridors in the United States. A map of major routes
in the U.S. illustrates the balance of the industry and how a
merger would improve competition by allowing CN-KCS to more
vigorously compete with larger Class Is and against long-haul
trucks for North-South flows of traffic. The map shows that CN-KCS
would not alter the competitive balance of the industry and will in
fact create new opportunities and increase choice for customers.
Importantly, this North-South merger involving two of the three
smallest U.S. Class I railroads would, if approved, be only the
fifth-largest U.S. Class I.
CN’s Strong Financial Profile Will
Drive Growth Through Investments
$250 million already committed for key investments, including in
Kansas City area across CN and KCS lines
CN has one of the strongest financial profiles of all the Class
I carriers, and it plans to maintain a strong balance sheet and
retain an investment grade credit rating throughout the transaction
and beyond. It has set forth a plan, including suspending stock
repurchases, to pay down rapidly the debt that it will secure to
fund a portion of the KCS purchase. The dividend policy during the
transaction will not change.
CN has been a sector leader in growth over the past two decades,
with targeted investments in its network to add capacity, deploy
technology to improve safety and productivity and invest in
railcars and locomotives. CN has already committed to investing
$250 million in infrastructure across CN and KCS lines. This
investment will result in more efficiency, more capacity and more
opportunities for employees and communities. The majority of this
investment will be utilized to upgrade the newly designated Kansas
City Speedway – the line between Kansas City, MO, and Gilman, IL,
providing a better, more competitive connection between Kansas City
and Chicago – with additional investments in Illinois, Missouri,
Michigan, Louisiana and Texas.
Kansas City remains a key location as the site of the combined
company’s U.S. headquarters, a major gateway and an additional line
to Detroit. KCS’ Shreveport-Kansas City line will be critically
important to providing additional CN service to key markets and
will not be downgraded or divested. Investments in the route will
be made at a similar level or higher in the years after the CN-KCS
combination is consummated.
As a larger truly North American continental enterprise with
complementary routes and an enhanced platform for revenue growth,
capital investment and job creation, CN and KCS are well-positioned
to create new growth opportunities for key stakeholders.
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 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’
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 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 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. The
registration statement includes 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. The
registration statement has not yet become effective. This news
release is not a substitute for the proxy statement or registration
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 PRELIMINARY
PROXY STATEMENT, THE REGISTRATION STATEMENT, THE 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 (INCLUDING ALL AMENDMENTS AND
SUPPLEMENTS THERETO) 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’ 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’ 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 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/20210707005320/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
Canadian National Railway (TSX:CNR)
Historical Stock Chart
From Mar 2024 to Apr 2024
Canadian National Railway (TSX:CNR)
Historical Stock Chart
From Apr 2023 to Apr 2024