CN outlines acquisition offer in letters to KCS, STB

CN announced yesterday it has written to Kansas City Southern’s board outlining the Canadian railroad’s "superior proposal" to acquire KCS in a cash-and-stock transaction valued at $33.7 billion, or $325 per share.

And today, CN filed a letter with the Surface Transportation Board, detailing why its proposal is pro-competition and in the best interests of customers. The letter also seeks to correct what the Class I characterizes as "misleading statements" by rival Canadian Pacific, which last month announced it had reached an acquisition and merger agreement with KCS.

In his April 22 letter to the KCS board, CN President and Chief Executive Officer JJ Ruest said his company’s proposal represents more than $50 per common share of incremental value than CP’s offer. He described CP’s response to the CN proposal as a distraction and an attack with “inaccurate and unfounded assertions."

"As you know, the railroad regulatory approval condition that is relevant to the KCS shareholders is approval of the voting trust, and CN is proposing to use the identical voting trust that CP has proposed," Ruest wrote. "CN is confident that the Surface Transportation Board will not subject CN’s proposal to any different standard or scrutiny in approving the voting trust than would be applicable to CP’s proposal. Both voting trusts are equally likely to be approved. CP’s deliberately misleading claims to the contrary are not correct."

CN’s proposed merger with KCS is in the public interest and will enhance competition, he added.

"Following the closing of the voting trust, CN is confident that it will be able to effectively address any reasonable remediation concerns and ensure that rail customers and other stakeholders benefit from the proposed combination with KCS," Ruest’s letter stated. "We look forward to sharing our views on these matters with you and your team."

KCS officials have said the board will evaluate CN’s proposal in accordance with the terms of the KCS merger agreement with CP and respond "in due course."