Business & Investment

Breaking News: Regulatory Rejects CN’s Proposed Voting Trust to Acquire KCS

NS Surface Transportation Board The CN unanimously voted on Tuesday to reject the proposed voting trust used to acquire Southern Kansas City, obscuring the outlook for the $ 33.6 billion merger. The STB said this trust “does not match the public interest standards under the merger regulations of the board of directors.”

“The Board has determined that the use of voting trusts in the context of imminent control applications causes potential public interest harm associated with both competition and sale,” the agency said in it. decision..

Both rivals CN and Canadian Pacific are looking to acquire KCS. CP and KCS Announced in March They planned to merge, but CN placed competing bids and KCS selected in May Participate in CN bids instead.

What is uncertain is KCS (NYSE: KSU) Shareholders process STB decisions. Shareholders will vote on Friday to approve the merger agreement between KCS and CN.

CN (NYSE: CNI) And Canadian Pacific (NYSE: CPAs of mid-Tuesday afternoon, I hadn’t commented on the STB decision yet.

Voting confidence needs to further explain how the merger enhances competition: STB

Authorities said in a decision issued that voting trusts did not meet the stricter federal standards governing major mergers between Class I railroads. Under these criteria adopted for mergers that occur after 2001, applicants are in the public interest to use voting trusts in a pending merger context, even if the perceived flaw is “repairable.” You need to “positively show” what you need to do.

The board also said that CN’s proposed trust focuses on how trusts benefit shareholders rather than the general public.

“The Board recognizes that CN, like any other merger suitor, has a legitimate interest in making strong proposals to KCS shareholders, but that” interest “is the suitor. It is for the private benefit of the company and does not bring the public interest on its own, “STB said.

“In addition, voting trusts are just one of several terms and conditions available to achieve CN’s stated objective of giving greater certainty to acquisition targets awaiting regulatory approval. … Applicants may prefer the proposed transaction to move forward in a voting trust, but the voting trust is clearly not “essential” to unleash the alleged public interest of the proposed transaction. Similarly, the acquisition’s preference for a merger agreement to have a pre-voting trust condition is not “public interest,” and therefore cannot be a component of the board’s “public interest” calculation, “STB continued.

Authorities also argued that the voting trust could isolate the proposed merger from regulatory scrutiny.

“By trusting KCS, KCS and CN are isolated from the regulatory risks and uncertainties associated with the increased scrutiny and increased likelihood of sale faced by the transactions proposed under the current major merger regulations. This is a favorable scenario for KCS shareholders and CN. Public interest costs to mitigate competition risks and rail network stability. “

The board of directors Overlapping 70-mile truck Further action needs to be taken between Baton Rouge, Louisiana and New Orleans.

“The Board emphasizes that it has not made a final decision on the scope of these competitive issues or whether they can be resolved. With the use of voting trusts under current major merger regulations. Given the close scrutiny that both of the proposed transactions are facing, it turns out that it is not in the public interest to allow the CN to own the KCS until a competitive issue arises. It was done, “STB said.

According to KCS, the merger agreement requires CN to acquire KCS in a share and cash transaction worth $ 325 per common stock, based on CN’s proposal on May 13, 2021, and is of corporate value. Means that the total is $ 33.6 billion. This includes the assumption of approximately $ 3.8 billion in KCS debt. Under the terms of the agreement with CN, KCS shareholders will receive $ 200 in cash and 1.129 shares of CN common stock for each share of KCS common stock.

Earlier this month CP has amended that offer He offered KCS an estimated $ 31 billion worth of stock and cash bids. suggestion, Then KCS refused, Valued KCS at $ 300 per share.

Subscribe to FreightWaves’ e-newsletter for up-to-date cargo insights in your inbox..

Click here for more Freight Waves articles by Joanna Marsh.

To fully cover the CN / CP / KCS situation click here..



Breaking News: Regulatory Rejects CN’s Proposed Voting Trust to Acquire KCS

https://www.freightwaves.com/news/breaking-regulators-reject-cns-proposed-voting-trust-to-acquire-kcs Breaking News: Regulatory Rejects CN’s Proposed Voting Trust to Acquire KCS

Back to top button