CALGARY, Alberta — Canadian Pacific is asking Kansas City Southern stockholders to vote against the railroad’s proposed merger with Canadian National.
The railroad filed a proxy statement to that effect on Thursday, with Canadian Pacific CEO Keith Creel saying his railroad would have preferred not to appeal to the KCS shareholders, but that with a meeting on the CN proposal set for Aug. 19, “we believe we have no choice.”
Creel contends voting for the CN deal is not in the shareholders’ interest, prior to a Surface Transportation Board decision on a voting trust while regulators consider the deal.
“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,” Creel said.
Canadian Pacific and KCS announced plans to merge in March, but CN subsequently made a $33.6 billion offer that was chosen by KCS in May [see “Kansas City Southern selects Canadian National …,” Trains News Wire, May 21, 2021]. CP continues to pursue its bid, believing the CN-KCS will not survive regulatory scrutiny.
I think CP is in a good position. My feeling is that the merger WILL be turn down. CP will go after KCS again but with a discounted offer (what MR. Vincent said) that will bleed CN of a lot of it’s cash. CN will be required to dispose of it’s KCS shares and may get at best 75 cents on the dollar but more like 60-65 cents on the dollar. I would really love it if CN got bit worse than that, say 45-50 cents on the dollar.
On the chance that the merger IS approved, they will have 4 good suitors. Don’t know who would pay the most. for it. I believe it would be an East West merger(NS or CSX) as opposed to a West West merger(UP or BNSF). I can’t see an Equity Buyout like FEC. Competition with other Railroads would be too much to live long.
Also got to remember, when CP announced their intent to merge with KCS, they started buying stock like crazy. Wouldn’t be surprised if they already owned 15-20% of KCS stock by time CN jumped into action. Thus CP could be a large,if not THE largest stockholder in CN. They could ask/demand seats on the board (which would give them inside information on their rival), or they could demand a higher price from CN to buy out their shares.
One comment I haven’t seen by anyone yet is if CN gets shot down STB and takes losses on the proposed merger, would they suddenly become a merger target or seek a White Knight merger partner. The billions they would probably loose in this fiasco could put them in big financial bind.
What’s CP got to lose?
If the STB turns down the CN merger, then CP (if they’re smart) makes a new offer….. way below the first offer.
I’ve been a KCS shareholder since 2005, bought in when the stock was at $17.00 a share. I have already cast my vote which is a “NO”. The competitiveness issue along with many factors like parallel routes. In addition a KCS-CN merger could eliminate 30% of the nations/ North American railroads by absorbing the KCS and forcing the CP to seek a acquirement from another larger railroad. This is the reason the CN deal in all likely hood will not get past the STB requirements. It is the essence of the STB to ensure competitiveness not eliminate it. The only deal that has ever made sense is a CP-KCS merger.
The KCS stock holders need to really evaluate the decision from the KCS board. They are gambling with your money. The stock has already devalued over $50 a share in the last month. If the STB rejects a voter trust it may drop another $50 a share. And who knows how much it could drop if we go into 2022 and it is ultimately rejected by the STB. The board is gambling with your money and they need to be held responsible for it. I would say vote them out if that does indeed occur.
In closing the CP deal from the beginning has been the best deal for a merger. It would of been completed in very early 2022 and we would be seeing the benefits now if they (KCS board) would of accepted it.
Boards of directors should be required to consider public and employee’s interest in addition to stockholder profits.
European style.
You want to dry up capital investment?
That would do it, turning business decisions into a political circus.
Who decides just what those “interests” are and how they’e valued/priced?
In a rational world a CP/KCS deal would be better for almost ll concerned. But the world is ruled by financialists and under that same version of CN is the winner.
Expected