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    CNR   CA1363751027

CANADIAN NATIONAL RAILWAY COMPANY

(CNR)
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CN fires back at TCI Fund Management, says claims are false and misleading

10/01/2021 | 12:36pm EST

Canadian National Railway Co. has forcefully pushed back against a British-based investor seeking changes at the railway, saying Friday that TCI Fund Management Ltd. had made false and misleading claims and that it has a clear conflict of interest.

"We will not indulge unfounded and bad-faith arguments that serve the interests of one shareholder over others," said CN chief executive Jean-Jacques Ruest in a statement.

He said that CN maintains an open and constructive dialogue with its shareholders, and is open to discussions about improvements, but that he wouldn't serve the interests of CN's competitors.

The comments come after TCI criticized CN's management and strategy, and criticized the railway for its risky and failed bid for Kansas City Southern.

TCI asked in mid-September for a special meeting of CN shareholders for the purpose of "refreshing" the railway's board and proposed Jim Vena, former chief operating officer at CN, as a potential replacement for Ruest.

CN said that TCI has failed to put out a credible or differentiated plan of its own, and that it has a conflict of interest as being the largest shareholder of CN's main rival, Canadian Pacific Railway Ltd.

"TCI’s motives are highly suspect," the railway said in the statement.

"(It) is trying to assert effective control over CN without presenting a credible plan to create superior or sustainable value."

The Montreal-based railway said that TCI's claims that it faced US$2 billion of losses from the KCS pursuit "have been proven blatantly false," noting that it gained US$700 million in breakup fees.

"CN shareholders should question TCI’s motives of endorsing CN’s closest competitor to pursue the transaction, while ignoring the equally compelling rationale of CN’s interest of pursuing the same transaction," Canada's largest railway said.

"CN believes the critical difference is that CP has limited long-term growth opportunities without KCS, while CN’s future as a standalone business is bright."

CN raised concerns about how TCI has measured the railway's financial performance.

It also pointed out that the board chair TCI is asking to step down had already announced in March that he would be doing so because he would be reaching his term limit.

TCI managing partner Chris Hohn said in September that the fund launched the proxy fight after CN Rail's bid for KCS showed a "basic misunderstanding of the railroad industry."

The often testy battle between Canada's two largest railways for Kansas City Southern ensued behind the scenes for months before CP Rail and the U.S. railway announced a friendly offer in March.

KCS switched alliances a month later by declaring CN's cash-and-stock bid valued at US$33.6 billion as superior.

However, the U.S. railway renewed its support for CP and its US$31 billion bid last month after the U.S. transportation regulator denied CN's use of a voting trust for KCS, saying it would be bad for competition.

This report by The Canadian Press was first published Oct. 1, 2021.

Companies in this story: (TSX:CNR, TSX:CP)

© 2021 The Canadian Press. All rights reserved., source Canadian Press DataFile

Stocks mentioned in the article
ChangeLast1st jan.
CANADIAN NATIONAL RAILWAY COMPANY 0.02% 161.9 Delayed Quote.15.66%
CANADIAN PACIFIC RAILWAY LIMITED -1.35% 88.19 Delayed Quote.1.24%
KANSAS CITY SOUTHERN -1.14% 287.54 Delayed Quote.-16.11%
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Financials
Sales 2021 14 496 M 11 302 M 11 302 M
Net income 2021 4 808 M 3 748 M 3 748 M
Net Debt 2021 11 552 M 9 007 M 9 007 M
P/E ratio 2021 23,9x
Yield 2021 1,52%
Capitalization 114 B 89 631 M 89 137 M
EV / Sales 2021 8,68x
EV / Sales 2022 8,36x
Nbr of Employees 23 765
Free-Float 99,4%
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Number of Analysts 29
Last Close Price 161,90 CAD
Average target price 164,49 CAD
Spread / Average Target 1,60%
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Managers and Directors
Jean-Jacques Ruest President, Chief Executive Officer & Director
Ghislain Houle Chief Financial Officer & Executive Vice President
Robert L. Pace Chairman
Dominique Malenfant EVP, Chief Information & Technology Officer
Nayan Bharadwa Vice President-Automated Rail & Technology
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