Inside Logistics

CP asks KCS shareholders to vote against CN

CP says delay needed to bring more information to light


July 30, 2021
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Canadian Pacific Railway Limited has filed a proxy statement asking Kansas City Southern (KCS) shareholders to vote against the proposed Canadian National-KCS combination at the KCS special meeting of stockholders on Aug. 19, 2021.

CP wants the delay so CN’s proposed acquisition can be decided later, “when more information will be available to KCS’s stockholders”, it said in a statement.

“CP has always said it wanted to do a friendly deal with KCS and that remains true,” said Keith Creel, CP president and CEO.

“CP would have preferred not to appeal directly to KCS’s stockholders, but given the impending vote on CN’s proposal, we believe we have no choice. What we are doing here is simply contesting the vote on the CN-KCS proposal because a ‘yes’ vote now would lock KCS stockholders in until February 2022, instead of their being free to consider other, better, options.

Creel added that it would not be in KCS shareholders’ “best interests” to make the vote “without the benefit of an STB decision on the CN voting trust proposal and without a chance to consider other proposals” until the spring of next year.

Under the terms of KCS’s merger agreement with CN, if KCS stockholders approve the merger, KCS will no longer be able to consider alternative proposals. KCS would also will be unable to terminate its merger agreement with CN in connection if a  superior proposal were received. KCS stockholders will not have another opportunity to vote on the merger, CP said.

Locked in until Feb. 2022

If STB voting trust approval is not received and/or continues to be litigated, and KCS stockholders have already approved the CN-KCS merger, KCS will be locked into the proposed CN merger until Feb. 21, 2022.

“Until there is more certainty on how the STB will decide on CN’s voting trust, KCS stockholders should not be asked to vote in favor of the CN-KCS merger and foreclose their opportunity to consider other potential superior proposals,” CP’s statement said.

CP voting trust approved

The STB has already approved CP’s use of a voting trust and affirmed KCS’s waiver from the new rail merger rules it adopted in 2001 because a CP-KCS combination is pro-competitive.

As previously announced, CP continues to pursue its application process to acquire KCS so that the pro-competitive CP-KCS combination can be reviewed by the STB and implemented without undue delay, in the event that KCS’s agreement with CN is terminated or CN is otherwise unable to acquire control of KCS.