Class 1 railroad Canadian Pacific has filed a proxy statement asking Kansas City Southern’s (KCS) shareholders to vote against the proposed merger KCS-Canadian National merger at the special meeting on 19 August.
CP says it made this request so that the proposed acquisition could be decided at a later date when more information would be available to KCS shareholders.
“CP has always said it wanted to do a friendly deal with KCS and that remains true. CP would have preferred not to appeal directly to KCS's stockholders, but given the impending vote on CN's proposal, we believe we have no choice. What we are doing here is simply contesting the vote on the CN-KCS proposal because a 'yes' vote now would lock KCS stockholders in until February 2022, instead of their being free to consider other, better, options.
“We want to ensure KCS stockholders are aware that a vote today, without the benefit of an STB decision on the CN voting trust proposal and without a chance to consider other proposals until the spring of next year, would not be in their best interests.”
It is not yet known what decision the Surface Transportation Board will make on CN’s request for a voting trust. Therefore, CP believes, KCS stockholders should hold off on voting on whether or not to approve the merger until this regulatory uncertainty is removed, since the decision would come with ‘severe consequences that are not in the KCS stockholders’ best interests’.
The merger agreement between KCS and CN states that after KCS stockholders approve the merger, KCS will be prevented from considering any alternative proposals. KCS will also be prevented from ending its agreement with CN should a superior proposal come along. This is the only opportunity KCS stockholders have to vote on the merger.
CP points out that should the STB not grant approval to the voting trust or should the decision continue to be litigated, KCS stockholders would be tied in until 21 Feb 2022, instead of having the option of seeking other opportunities. KCS stockholders should not be asked to vote in favour of the CN-KCS merger before the STB made its decision, CP said.
Canadian Pacific said it believed a CP-KCS combination remained the only viable merger between Class 1 railroads. The STB had approved the use of a voting trust for a CP-KCS merger.
