CP Welcomes STB Decision On Kansas City Southern Deal; KCS Says Talks With CN

(RTTNews) - Canadian Pacific Railway Limited (CP, CP.TO) welcomed the Surface Transportation Board decision to uphold waiver for a merger between Canadian Pacific Railway and Kansas City Southern (KSU).

The Surface Transportation Board or "STB" confirmed that the waiver it granted to Kansas City Southern or "KCS" in 2001 is applicable to the proposed friendly combination of the two companies. CP and KCS will proceed with an Application under the standards set forth in the STB's pre-2001 major merger rules.

According to the STB, the CP/KCS merger would result in the smallest Class I railroad, based on U.S. operating revenues and also result in few overlapping routes. CP is seeking approval from the STB for the merger with KCS. The STB review is expected to be completed by the middle of 2022.

On Saturday, Kansas City Southern said its board determined that the unsolicited proposal received from Canadian National Railway (CNR.TO, CNI) or "CN" on April 20, 2021 to acquire KCS in a cash and stock transaction valued by CN at $325 per KCS share could reasonably be expected to lead to a "Company Superior Proposal" as defined in KCS's merger agreement with Canadian Pacific Railway.

KCS noted that it plans to provide CN with nonpublic information and to engage in discussions and negotiations with CN with respect to CN's proposal.

KCS said it remains bound by the terms of the CP merger agreement, and KCS's Board has not determined that CN's proposal in fact constitutes a Company Superior Proposal as defined in the merger agreement with CP.

As previously announced on March 21, KCS reached a merger agreement with CP, by which CP agreed to acquire KCS in a stock and cash transaction valued at $275 per KCS share based on the CP and KCS closing prices on March 19, 2021.

Meanwhile, Canadian National Railway said Saturday that it looks forward to engaging with Kansas City Southern to complete confirmatory due diligence and finalize a definitive merger agreement.

Canadian National Railway said it welcomed the determination by Kansas City Southern board of directors that CN's proposal to combine with KCS could reasonably be expected to lead to a "Company Superior Proposal" as defined in KCS' existing merger agreement with Canadian Pacific Railway.

Canadian Pacific Railway, in a response, said Saturday that the board of KCS is simply meeting its obligations under the merger agreement with CP and fulfilling its fiduciary duty to its shareholders by assessing the CN offer.

"We fully support the board of KCS in reviewing CN's offer. we are confident through this process that they will recognize this unsolicited bid is fraught with challenges, uncertainties and regulatory risks that are not present in the seamless, pro-competitive and pro-service CP-KCS combination," said CP President and CEO Keith Creel.