KCS (NYSE: KSU) shareholders are holding a special meeting on Aug. 19 to vote on the CN (NYSE: CNI) merger agreement with KCS. Rivals CP and CN are both seeking to acquire KCS. CP and KCS announced in March their plans to merge, but then CN put forth a competing bid and KCS opted in May to go with CN’s bid instead.
CP (NYSE: CP) last Friday urged KCS shareholders to vote against the merger, saying that if KCS shareholders hold off on their approval, they will have the opportunity to gather more information about the acquisition, including federal regulators’ views of the merger.
But KCS said Monday that its shareholders should focus on the merger agreement and not on CP’s tactics to cast doubt on the merger’s regulatory prospects.
CP’s actions “are part of an effort to defeat a transaction that offers KCS shareholders $50 per share more than CP was willing to offer. In May, CP decided not to take advantage of its five-business-day match right, per the terms of its initial merger contract, to compete with CN’s superior proposal,” KCS said.
“Since that time, CP has consistently criticized our combination with CN. CP claims in its latest filing that it is, ‘ready to re-engage with KCS,’ but it did not make any new proposal in its most recent filing. Nor did it commit to making one in the future, going on to say, ‘there can be no assurances that Canadian Pacific will make an offer or proposal to KCS,’” KCS continued.
“KCS believes that shareholders should focus on the opportunity to receive a value under the CN combination of $325 per share, compared to CP’s now terminated offer of $275 per share. We believe that CP’s recommendation to vote against our combination with CN is not in our shareholders’ interest. Shareholder approval of the CN transaction best positions KCS to deliver superior value to our shareholders as soon as possible.
“We continue to recommend that our shareholders vote ‘FOR’ the combination with CN, which has compelling benefits for all stakeholders including notably, our customers. Together with CN, we will create the premier railway for the 21st century, bringing together highly complementary networks to benefit customers, enhancing industry competition, and delivering significant value to shareholders immediately upon close of CN’s voting trust.”
CN’s merger agreement with KCS calls for each share of KCS common stock to be exchanged for $200 in cash and 1.129 shares of CN common stock, according to a KCS.CN says the offer value is worth $33.6 billion and includes the assumption of approximately $3.8 billion of KCS debt.
CP said Thursday that by approving the merger agreement, KCS shareholders would lock KCS into an agreement with CN until Feb. 21, 2022, the end date under the CN merger agreement, CP said.
“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,” CP President and CEO Keith Creel said in a release.
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