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
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
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
The proposed combination will establish seamless, single-line service from
“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.”
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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.
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
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
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
CN’s Strong Financial Profile Will Drive Growth Through Investments
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
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’
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
About Kansas City Southern
Headquartered in
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
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
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
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
Contacts:
Media: CN CN Media Relations & Public Affairs (514) 249-4735 Mathieu.Gaudreault@cn.ca (403) 512-5730 mcej@longviewcomms.ca (917) 459-0419 / (917) 818-9002 jdoorley@brunswickgroup.com rkral@brunswickgroup.com Media: KCS (816) 983-1372 dcarlson@kcsouthern.com (212) 355-4449 | Investment Community: CN Vice-President Investor Relations (514) 399-0052 investor.relations@cn.ca Investment Community: KCS Vice President Investor Relations (816) 983-1530 athorne@kcsouthern.com (212) 929-5748 / (212) 378-7071 dburch@mackenziepartners.com lconnell@mackenziepartners.com |
Source:
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