CANADIAN NATIONAL ENTERS BIDDING WAR WITH CANADIAN PACIFIC FOR KANSAS CITY SOUTHERN

No vote before the STB ruling ...

"The KCS Board of Directors has determined, with the concurrence of CN, that if the STB has not released a public decision by August 17, 2021, at 6:00 p.m., Central Time, the Special Meeting will be adjourned to give all shareholders and the Board time to receive and consider the STB decision. If the meeting is adjourned, the Board will announce the date on which it will reconvene the meeting. "

(Aug 12th Press Release PDF)

Isn't there supposed to be a final decision of who the new owner of KCS will be by August 19th?

Pensyfan19 wrote: ↑Fri Aug 13, 2021 6:26 pm Isn't there supposed to be a final decision of who the new owner of KCS will be by August 19th?

The STB has promised a decision on CN's voting Trust by August 31st, 2021. If the STB approves the Voting Trust, then CN would likely move to purchase KCS as quickly as possible. In a different scenario, if the STB does not approve CN's request for KCS to be placed in a Voting Trust, I could see KCS selling out to CP, since the STB has already approved CP's request. No matter what happens with the Voting Trust decision neither CN nor CP will be able to take control and merge KCS's operations into their own before summer 2022 at the earliest. Of course there is still the possibility that the STB could say "No" to both CN and CP, leaving KCS independent. If that happens look for KCS stock to take a hefty drop in price.

Pensyfan19 wrote: ↑Fri Aug 13, 2021 6:26 pm Isn't there supposed to be a final decision of who the new owner of KCS will be by August 19th?

There is no decision between CN and CP pending. KCS can only be engaged to one partner at a time. They broke their engagement with CP and paid a $700 million penalty (covered by CN). Now KCS is engaged to CN and are subject to a similar $700 million penalty if they break that deal (plus repaying the $700 million CN paid CP). The vote scheduled for next week (and likely to be postponed) is a simple question for KCS shareholders to approve or reject the deal with CN. There is no choice on the ballot for CP.

Likewise the STB is absolutely NOT making the choice of who buys KCS. They are tasked with either allowing or disallowing the transfer of ownership and separately the transfer of control of KCS. They have approved the transfer of ownership of KCS to CP (the CP voting trust, with modifications). They have not yet approved the transfer of ownership of KCS to CN.

Transfer of ownership (and separately transfer of control) is permission. The approval of the CP voting trust says that the companies MAY use a voting trust to transfer ownership of KCS to CP. That approval does not require the ownership to be transferred. The STB can approve both voting trusts. It is not an either/or choice for the STB.

Next year's decision will be transfer of control. The STB will decide separately if control of KCS can be transferred to CN or if control of KCS can be transferred to CP. Each question is entirely separate and the STB could say yes to both. Again, it is a question of permission not a binding decision that would force control to be transferred. But given that KCS will already be owned by CN or CP through a voting trust by the time that control decision is made it is fairly obvious that the owner will use their permission (if granted) to take control of their company.

Good explanation, thank you for that

KCS has decided to postpone the shareholder vote until after the STB decides on the voting trust!

From Railway Age:

While, as expected, “reaffirm[ing] its recommendation to shareholders to vote in favor of the pro-competitive, end-to-end merger with CN,” the KCS board said that since the joint voting trust application is currently under review by the STB, and since the STB announced Aug. 10 that it expects to issue a decision on the use of the CN voting trust no later than Aug. 31, it has determined, “with CN’s concurrence,” that if the STB has not released a public decision by 7:00 p.m. EDT on Aug. 17, the Aug. 19 Special Meeting will be adjourned “to give all shareholders and the board time to receive and consider the STB decision. If the meeting is adjourned, the board will announce the date on which it will reconvene the meeting.”

https://www.railwayage.com/freight/clas ... ut-called/

Great decision on behalf of the KCS board ensuring that shareholders' wallets don't get decimated if the STB denies the voting trust. CP's 30 billion bid must have been a factor in this decision, putting additional pressure on KCS. Having said that, I still don't think KCS shareholders (and certainly not the board) are convinced by CP's deal. Maybe things will change if STB denies the voting trust since CP already has a voting trust with KCS approval.

JayBee wrote: ↑Fri Aug 13, 2021 6:52 pmThe STB has promised a decision on CN's voting Trust by August 31st, 2021.

Tick Tock ....

The STB will decide if the voting trust will go ahead tomorrow. An application will be filed after, then it's on to full STB review.

The poster's preference is for the voting trust to be denied so KCS goes back to CP, but I think the STB will end up approving the trust.

I know we are all eagerly awaiting the voting trust decision, but today I checked Trains Newswire expecting news about the voting trust decision. Instead I saw this:

From Trains Magazine:

TCI Fund Management — which in May asked CN to call off its proposed merger with Kansas City Southern — is now CN’s largest single shareholder.

Alright, if this is how we get CPKC, then i'm for it.

TCI said it would seek to shape CN’s operations, management, strategy, capital allocation policies, and the composition of its board of directors. It also wants to discuss “extraordinary transactions with third parties,” which is legalese for a merger.

Oh. OH. UHH...

TCI also has an investment in Union Pacific.

...

Things are about to get real interesting real quick.

https://prod.stb.gov/news-communication ... /pr-21-37/

Voting trust rejected!

Will KCS ditch CN for CP?
Will TCI start a proxy conflict against CN?
The world wonders...

Wow! I forget, why was the CP voting rights trust considered under "old rules" vs. CN considered under the present rules?

BandA wrote: ↑Tue Aug 31, 2021 1:38 pm Wow! I forget, why was the CP voting rights trust considered under "old rules" vs. CN considered under the present rules?

Simple, CP and KCS elected to have their merger be reviewed under the old rules, while CN and KCS elected to have their merger reviewed under the new rules. CN could have had the merger reviewed under the old rules since any merger involving KCS is exempt from the new rules, but for some reason chose not to. Shot themselves in the foot with that one.

BandA wrote: ↑Tue Aug 31, 2021 1:38 pm Wow! I forget, why was the CP voting rights trust considered under "old rules" vs. CN considered under the present rules?

The most likely reason is that KCS and CP are the two smallest Class I railroads. After a merger between the two companies it would still be the smallest Class I railway, just closer in size to the big 5 companies. Remember the Class I railroads only considers US operations of the two Canadian companies. If Canadian operations are considered by revenue the CN would be larger than NS and possibly CSX.

Shortline614 wrote: ↑Tue Aug 31, 2021 2:13 pmSimple, CP and KCS elected to have their merger be reviewed under the old rules, while CN and KCS elected to have their merger reviewed under the new rules. CN could have had the merger reviewed under the old rules since any merger involving KCS is exempt from the new rules, but for some reason chose not to. Shot themselves in the foot with that one.

I doubt that the STB would have used the old rules with CN and KCS even if the old rules were requested. While both proposals involve KCS, the CN-KCS merger had the potential of a bigger impact on the industry.

The Journal reports.

Fair Use:

Canadian National Railway Co. $30 billion bid to buy Kansas City Southern ran into a major obstacle Tuesday, with regulators ruling the Canadian railroad won’t be permitted to complete a deal using a temporary voting trust that was a crucial part of the offer.

The Surface Transportation Board, a five-member panel that must bless mergers of freight railroads, said Tuesday in a filing posted to its website that Canadian National hadn’t demonstrated that its use of a voting trust would be consistent with the public interest.