Canadian National Railway Company - President and CEO, JJ Ruest
President and CEO, JJ Ruest
Source: CN Rail
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  • Kansas City Southern (KCS) intends to terminate its merger agreement with CP Rail
  • KCS has deemed CN’s revised US$33.6-billion offer to be superior
  • KCS shareholders will receive $200 in cash and 1.129 shares of CN common stock for each KCS common share
  • CN will also pay a US$700-million break fee to Canadian Pacific Railway
  • CP Rail now has the right to amend its offer, with the KCS board to determine whether a revision constitutes a better offer than CN’s
  • CN (CNR) safely transports more than 300 million tons of natural resources, manufactured products, and finished goods throughout North America every year
  • CN Rail (CNR) opened trading at C$135.08 per share

Kansas City Southern (KCS) is terminating its merger agreement with CP Rail in favour of Canadian National Railway’s revised US$33.6-billion offer.

CN’s proposal offers KCS shareholders $325 per common share implying a total enterprise value of $33.6 billion, including the assumption of approximately $3.8 billion of KCS debt.

Under the terms of CN’s revised proposal, KCS shareholders will receive $200 in cash and 1.129 shares of CN common stock for each KCS common share, with KCS shareholders expected to own 12.6% of the combined company.

KCS’s preferred shareholders will receive $37.50 in cash for each preferred share.

CN will also pay a US$700-million break fee to Canadian Pacific Railway.

JJ Ruest, President and CEO of CN commented,

“We are delighted that KCS has deemed CN’s binding proposal superior, recognizing the many compelling benefits of our combination and expressing confidence in CN’s ability to obtain the necessary approvals and successfully close the transaction.

Our proposal offers a clear path to completion and is structured in a way that gives KCS shareholders both greater immediate value and the opportunity to participate in the future upside of the combined company.

Together, CN and KCS will seamlessly connect ports and rails in the United States, Mexico and Canada by providing superior service, enhanced competition and new market access to move goods across North America safely and efficiently. We are encouraged by the widespread support we have received for the transaction thus far and will continue to work closely with KCS and all relevant stakeholders to fully realize the benefits and opportunities available through a combined CN-KCS.”

Robert Pace, Chair of the Board of CN added,

“We are the better bid, better partner, better railway and best solution for KCS, and are pleased that the KCS Board of Directors has recognized the superiority of our proposal. We look forward to continuing to engage constructively with KCS’ Board to execute a definitive merger agreement in the near term and deliver the benefits of this transaction to both companies’ stakeholders.”

The combination of CN and KCS will further connect North America’s industrial corridor and create new options for shippers and new revenue for the combined company. 

CN has received more than 1,000 letters of support from customers, partners and elected officials since it first made its proposal.

The transaction is subject to approval by KCS shareholders, approval by the U.S. railway regulator of a voting trust and other regulatory approvals.

CP Rail now has the right to amend its offer, with the KCS board to determine whether a revision constitutes a better offer than CN’s.

CN safely transports more than 300 million tons of natural resources, manufactured products, and finished goods throughout North America every year.

As the only railroad connecting Canada’s Eastern and Western coasts with the U.S. South through a 19,500-mile rail network, CN and its affiliates have been contributing to community prosperity and sustainable trade since 1919.

CN Rail (CNR) opened trading at C$135.08 per share.

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