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Kansas City Southern today announced that its board has unanimously determined that the acquisition proposal it received from CN on May 13 continues to constitute a “company superior proposal” under KCS’s pending merger agreement with Canadian Pacific.
As a result, KCS terminated the CP merger agreement and entered into a merger agreement with CN, KCS officials said in a press release.
Under the terms of the CN merger agreement, upon closing, each share of KCS common stock will be exchanged for $200 in cash and 1.129 shares of CN common stock. Closing will be subject to customary conditions, including KCS stockholder approval and approval by the Surface Transportation Board (STB) of CN’s proposed voting trust.
In connection with the termination of the CP merger agreement, KCS paid CP a breakup fee of $700 million, which will be reimbursed by CN. KCS will be obligated to refund this amount under certain limited circumstances, including if KCS terminates the CN merger agreement to accept a superior proposal.
In response to the KCS board’s decision to terminate the merger agreement, CP officials today said they’ve sent a letter to the STB indicating the company will pursue board review of an application to control KCS.
CP’s letter outlines why it believes that pursuing its STB application is in the best interests of KCS and the public so that the “pro-competitive” CP+KCS combination can proceed to be reviewed, CP officials said in a press release.
“CP intends to proceed to prepare and file its application in this docket seeking [STB] authority to control KCS and its U.S. rail carrier subsidiaries,” the letter states.
CP’s letter can be read here.
Meanwhile, at their annual meeting held yesterday, KCS stockholders elected directors and KCS President and Chief Executive Officer Patrick Ottensmeyer to serve on the company’s board until the 2022 stockholders meeting.
In addition to Ottensmeyer, the following were elected: Lydia Beebe, Lu Cordova, Robert Druten, Antonio Garza Jr., David Garza-Santos, Janet Kennedy, Mitchell Krebs, Henry Maier and Thomas McDonnell.