Major investor urges CN to drop its pursuit of KCS

TCI Fund Management, one of CN’s largest investors, is calling on the Class I to withdraw its acquisition bid for Kansas City Southern. TCI also is urging CN Chairman Robert Pace and Chief Executive Officer JJ Ruest to step down.

TCI, which owns more than 5% of CN’s outstanding shares, announced its position on the same day the Surface Transportation Board’s Aug. 31 decision to deny CN’s request to use a voting trust plan as part of its acquisition of KCS.

In an Aug. 31 presentation to the CN board, TCI called for Jim Vena — a former CN chief operating officer who most recently served as chief operating officer at Union Pacific Railroad — to be appointed CEO. TCI also called for former CN board member Gil Lamphere to be appointed as a director.

In May, after the STB announced it would apply its latest merger rules regarding voting trusts in its consideration of CN’s proposal to acquire KCS, TCI wrote a stinging letter to Pace calling on the board to drop its pursuit of KCS or alter the merger proposal.

"In light of [the May 18th] STB ruling, we think it is negligent and hugely irresponsible for the CN board to commit C$2 billion of shareholders' money on whether the STB will approve the voting trust for the CN-KCS transaction. … The STB is sending a clear signal and the CN board has a duty to listen. The risk that the voting trust is not approved is too great to ignore," TCI's letter stated.

TCI's May 18th letter to Pace can be read here. The Aug. 31 presentation to the board can be read here.

TCI is also the largest shareholder of Canadian Pacific, which yesterday reaffirmed its Aug. 10 offer to acquire KCS. TCI does not own a position in KCS.