Kansas City Southern To Hold CN-KCS Merger Vote In September

Kansas City Southern shareholders will wait until Sept. 3 to decide whether they will approve the merger agreement with Canadian railway CN.

KCS KSU had planned to hold the shareholder vote on Thursday, but it opted to postpone the meeting until after the Surface Transportation Board renders its decision on CN's proposed voting trust. The board will render that decision by Aug. 31.

CN CNI seeks to use a voting trust as part of the process to merge with KCS, and KCS and CN have previously indicated the merger is predicated on STB's approval of the trust.

KCS' board of directors is still urging company shareholders to vote to approve the merger.

"KCS and CN are confident that the voting trust meets all the standards and the public interest test set forth by the STB and believe that it should be approved," KCS said Thursday. "KCS stockholders will receive the merger consideration immediately upon the closing of the voting trust, which is also subject to receipt of KCS stockholder approval and Mexican regulatory approvals."

Rivals CN and Canadian Pacific 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.

According to KCS, the CN-KCS merger agreement calls for CN to acquire KCS in a stock-and-cash transaction valued at $325 per common share, based on CN's May 13, 2021, offer, implying a total enterprise value of $33.6 billion. This would also include the assumption of approximately $3.8 billion of KCS debt. Under the terms of the agreement with CN, KCS stockholders will receive $200 in cash and 1.129 shares of CN common stock for each KCS common share.

CP CP offered a revised bid to acquire KCS last week, which KCS subsequently dismissed. But CP said it is still interested in acquiring KCS should the merger fall through.

CP last week presented KCS with a stock-and-cash bid worth an estimated $31 billion. The proposal valued KCS at $300 per share.

"By rightly postponing Thursday's meeting, the KCS Board of Directors appropriately will allow stockholders to have access to all the information needed before voting on the CN-KCS merger proposal," including the STB's decision on CN's proposed voting trust, CP said Thursday in response to KCS' decision.

"Delaying the stockholder vote also means KCS stockholders won't become locked into a CN-KCS combination and then unable to consider other, better options like CP's Aug. 10 proposal, which remains outstanding," CP said.

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