CN rips TCI for making 'false' claims, calls out 'conflict of interest'

CN today responded to what it describes as “numerous misleading claims and inconsistencies” in recent disclosures by CIFF Capital and TCI Fund Management (collectively TCI), a major shareholder of CN.

In a press release, CN officials said TCI has a “glaring conflict of interest” as the largest shareholder of Canadian Pacific, which is CN’s direct competitor. CN highlighted what it says are TCI’s “erroneous” claims, including:
• false or misleading characterizations of CN’s performance;
• inaccurate description of financial risks associated with CN’s bid for Kansas City Southern and refusal to acknowledge that CN walked away with an incremental $700 million amongst other strategic benefits;
• failure to provide a credible or differentiated plan; and
• failure to acknowledge concerns over the fact that TCI is the largest shareholder of CN’s principal competitor.

In recent months, TCI officials have criticized CN’s attempt to acquire KCS after CP and KCS announced a proposed merger in March. As the CP-KCS discussions were occurring, CN proposed a more lucrative bid for KCS, which accepted it and the two began discussions about a proposed merger.

Those talks fell apart, however, after the Surface Transportation Board (STB) determined that a voting trust scenario could not be used in a proposed CN-KCS combination. CP then made another proposal to combine with KCS, which accepted it and the two are now pursuing their plan.

As part of their criticisms of CN, TCI officials have called for board and executive changes at the company, including the replacement of President and Chief Executive Officer JJ Ruest.

Today, Ruest issued the following statement: "CN has announced an ambitious strategic plan to deliver immediate and long-term shareholder value, while retaining our commitment to safety, customer service and the communities we serve. This plan builds on the investments we have made in technology and capacity over the past three years to drive long-term sustainable growth in total revenues and operating margins.

"CN maintains an open and constructive dialogue with its shareholders, including discussions about areas where we can improve our business performance, but we will not indulge unfounded and bad-faith arguments that serve the interests of one shareholder over others — or of one of our competitors over CN. CN's board and senior management team are intently focused on putting forward ideas, initiatives and people that drive us forward to where CN and the railroad industry are going, not where it’s been."

CN will demonstrate in due course how TCI’s criticisms “are largely false or misleading,” the press release stated.

TCI is a recent 5% shareholder seeking to install its hand-picked CEO and elect five directors (including the CEO) to a board of 11, but has yet to put forward a credible plan for CN customers, shareholders and communities, CN officials said.

"Contrary to the false narrative TCI is propagating, CN’s bid for KCS was the right strategic move for CN, and it resulted in multiple benefits for CN," they added.

"TCI's motives are highly suspect," they said. To read the entire CN statement, click here.