CP calls on KCS board to reject CN's merger proposal

Canadian Pacific today sent a letter to Kansas City Southern's board calling on members to reject CN’s proposal in light of intervening events and reaffirming its commitment to the pro-competitive CP-KCS combination under the preexisting merger agreement.

Written by CP President and Chief Executive Officer Keith Creel, the letter emphasizes CP’s stance that CN's merger proposal "is illusory and simply an attempt to dismantle the unique, pro-competitive deal that CP and KCS" agreed to in late March.

"While we respectfully disagreed with the KCS board's decision last week to deem the revised CN proposal a company superior proposal, we could understand how the KCS board might come to that decision given its fiduciary duties. Nevertheless, we have remained confident that the Surface Transportation Board (STB) would ultimately reject CN's proposal to use a voting trust, given that allowing CN to close into trust would not be in the public interest," Creel wrote.

Creel also noted that after KCS received the revised CN proposal, a number of things occurred that should lead the KCS board to conclude that CN’s proposal is not "superior" as defined in the CP-KCS merger agreement. Those occurrences were the U.S. Department of Justice’s stated concerns about a CN-KCS merger and the STB's decision to apply more stringent merger rules to CN’s proposal.

"Respectfully, we feel it would be destructive to our mutual interests to engage in a bidding war in reaction to CN's illusory offer, particularly where our existing CP-KCS Merger Agreement provides KCS's shareholders with a significant premium," Creel wrote.

To read Creel’s letter in full, click here.