Highlights:
* Unprecedented pro-competitive commitments will enhance route choice and provide all market participants, railroads and shippers a fair chance to compete
* Transaction is about creating a new rail product and pro-competitive market philosophy for the future
* New direct rail service, preserving interline routing options with the gateway commitment, and offering price transparency through separately challengeable segment rates will deliver on commitment to preserve and enhance competition for all shippers
As outlined in the joint filing to the
Delivering more choices to our rail customers: The combination allows shippers the ability to connect with other Class I carriers up and down the combined network so that a shipper can use the most efficient and lowest cost gateway and routing options available for a particular move. The combined network will connect with partner Class Is at numerous major gateways, providing unprecedented choice, resiliency and flexibility. More choice tilts negotiations in the customer's favor. The proposed CN-KCS combination makes that possible.
Keeping gateways open on commercially reasonable terms: CN and KCS are committed to keeping CN and KCS major rail gateways open both physically and commercially. This means, for example, that agricultural customers, including farmer-owned co-operatives enjoying existing competitive joint line routings through gateways with CN or KCS and another carrier, will continue to have those routings available upon completion of the merger. Everyone benefits from this commitment. Customers will continue to enjoy the interline service they have today, along with new, enhanced rail-to-rail competition that the combination would make possible. And by creating more optionality through major gateways, we will offer customers a new ability to shop for the best price and service combination.
Using confidential, voluntary, binding arbitration to enforce the gateway commitment: CN and KCS will offer voluntary, confidential, binding arbitration to permit quick resolution of any commercial dispute over the gateway commitment with our customers.
Creating greater price transparency: We are talking with our customers about a binding merger commitment in which, upon request from a customer, a combined CN-KCS will offer a separate segment rate for the CN-KCS portion of a movement, in addition to a through rate for the entire movement. This commitment to price transparency will enhance competition throughout the rail industry. With more transparency, each carrier in a move will need to justify its price, escalation and service, which will foster greater rail-to-rail competition.
In an op-ed published by Railway Age on
'This commitment ensures that shippers who today enjoy competitive joint line routings with either CN or KCS will continue to have those routings available to them in a post CN/KCS merger environment, even if a merged CN/KCS could handle the entire movement via a single-line routing.'
'This means continued competition, and we know that competition encourages lower rates, better service and innovation.'
'The commitment is not just about maintaining physical routings, but also about ensuring that the routings are commercially reasonable to the shipper. What is meant by 'open on commercially reasonable terms'? This means all market participants, railroads and shippers will benefit: They will get a fair chance to compete. They will pay and receive remunerative rates and get efficient service. If a shipper is not happy with their service, they can switch to another carrier because they will still have a choice.'
'A CN/KCS combination will create a strong new rail-to-rail competitor that will provide new single-line rail movements in competition with other rail carriers. In addition, with the gateway commitment, shippers will also have the option to use an existing routing or other routings involving more than just the merged CN/KCS.'
The CN-KCS combination will create a more competitive marketplace that will attract more freight to rail and will expand North American trade and power economic prosperity, provide numerous new connections and service options for customers, as well as deliver many compelling and innovative benefits for ports, employees and communities.
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
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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 CN and 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 and KCS caution that their 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
Forward-looking statements reflect information as of the date on which they are made. CN and KCS assume 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 or KCS does update any forward-looking statement, no inference should be made that CN or KCS 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 REGISTRATION STATEMENT, THE PROSPECTUS, THE PROXY STATEMENT 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 the registration statement, the prospectus, the 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
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