Inside Logistics

CP calls on KCS board to reject CN offer

Says bidding war would be destructive


May 20, 2021
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Canadian Pacific has sent a letter to Kansas City Southern’s (KCS) Board of Directors calling on them to reject Canadian National’s merger proposal.

In the letter, signed by CEO Keith Creel, CP said the CN proposal is “illusory” and the level of risk around the CN transaction is too high for it to be a “superior proposal”.

CP also said it will not engage in a bidding war for the US railway, “particularly where our existing CP-KCS Merger Agreement provides KCS’s shareholders with a significant premium.”

In the letter Creel cited the U.S. Department of Justice’s (DOJ) comment that was publicly filed with the STB on May 14 , and  the STB’s decision on May 17 to apply the more stringent 2001 merger rules to CN’s proposal to acquire KCS, and CN’s effort to obtain approval to use a voting trust.

He pointed out that the DOJ stated the CN-KCS merger would include “the potential elimination of direct, ‘parallel’ competition on routes served by both railroads, for example between Baton Rouge and New Orleans.”

Creel said the KCS Board could best fulfill its fiduciary duties in light of recent developments by continuing to pursue the CP-KCS combination, which already has the benefit of STB approval to use a voting trust.

“We look forward to closing this chapter on the CN proposal and continuing to work together towards our common goal to complete the CP-KCS combination, the only viable Class 1 merger, which will be transformational and creates meaningful and compelling immediate short and long-term value serving the best interests of our respective customers, stakeholders and the North American economy,” Creel said in the letter.