Sunday, September 26, 2021

The takeover vote for Kansas City South was postponed after the Federal Council ruling

After regulators rejected key parts of the plan, the planned shareholder vote on the Canadian Nationals’ $33.6 billion offer was postponed, so now Kansas City Southern Railroad can consider all its options, including the $31 billion from Canadian Pacific Railway. Offer.

Although both Kansas City Southern and Canadian National Airlines expressed disappointment with the Ground Transportation Commission’s ruling on Tuesday, Canadian Pacific officials expressed optimism on Wednesday that they will be able to complete the deal they first announced in March after months of repeated iterations. . KCS shareholders were originally scheduled to vote on the CN transaction on Friday.

“Now is the time to continue to do this and create important value for shareholders, customers and employees,” said Keith Creel, CEO of Canada Pacific.

CP is headquartered in Alberta, Canada, and its US headquarters is in Minneapolis.

The Federal Ground Transportation Commission said on Tuesday that during the commission’s lengthy review process, it is not in the public interest to allow CN to use voting trusts to acquire southern Kansas City and hold railroads. This decision puts the CN transaction into trouble because the use of voting trusts that would have allowed shareholders in southern Kansas City to get paid in advance is a key part of the transaction.

The board seemed to agree with Canadian Pacific’s concerns about the impact of competition throughout the central United States. KCS and CN operate parallel rail lines connecting the Midwest and the Gulf Coast, so merging the two will eliminate transportation options for many companies.

Canadian nationals are now facing pressure from major shareholders to abandon the deal in southern Kansas City. London-based investment company TCI Fund said in a letter on Tuesday that CN should appoint a new CEO and refocus on improving its operations.

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Canadian Pacific’s proposal to acquire southern Kansas City has been approved and can use voting trusts, so if the KCS board of directors agrees to accept the lower proposal, the way forward for this transaction will be clearer.

Since there is almost no overlap between the two railway networks, there are fewer competition concerns about the CP-KCS merger. Even after the transaction is completed, the combined railway will be the smallest of the major railways in North America.

“We have two like-minded companies. They care about our customers, care about our employees, care about the services we provide and the value we create. You put them together and it creates a very strong marriage,” Kerry Er said.

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If the transaction does move forward, it will be the first time since the 1990s that the merger of two major railways has been involved. The Ground Transportation Commission generally stated that any transaction involving one of the six major U.S. railroads needs to strengthen competition and serve the public interest before it can be approved. The board also stated that it will consider whether any transactions will destabilize the industry and prompt more mergers.

For more than two decades, the railroad industry has remained stable. There are two railroads in the western United States—BNSF and Union Pacific—two in the eastern United States—CSX and southern Norfolk—and two railroads serving parts of the United States. Canadian Railways.

The takeover vote for Kansas City South was postponed after the Federal Council ruling
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