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A day after the Surface Transportation Board (STB) rejected the use of a voting trust in the proposed merger between CN and Kansas City Southern, KCS confirmed today that it received an unsolicited proposal from Canadian Pacific reaffirming its interest in acquiring KCS.
KCS officials said CP reiterated identical terms to the proposal made on Aug. 10, in which KCS common stock holders would receive 2.884 CP common shares and $90 in cash for each share of KCS common stock held.
In addition, CP reiterated that holders of KCS preferred stock would receive $37.50 in cash for each share of KCS preferred stock held.
The KCS board will evaluate the CP proposal “in accordance with the terms of KCS’ merger agreement with CN and respond in due course,” KCS officials said in a press release.
On May 21, KCS announced that it had entered into a definitive agreement with CN, in which CN agreed to acquire KCS in a stock and cash transaction valued at $325 per KCS share. The transaction is subject to customary closing conditions including receipt of regulatory approvals and the approval of KCS stockholders.
The STB yesterday announced a unanimous decision rejecting the use of a voting trust agreement in connection with the proposed CN-KCS combination. The board determined that the proposed voting trust is not consistent with the public interest standard under the board's merger regulations.
KCS officials said they are disappointed in the STB's decision.
"We are working with CN to evaluate the options available to us," they said in a prepared statement. The company intends to adjourn the special meeting of KCS stockholders to vote on the previously announced definitive merger agreement with CN and other proposals. The special meeting is currently scheduled for Sept. 3.
CN officials said they remain confident that their proposed combination with KCS "is in the public interest and that it would offer unparalleled opportunities and benefits for customers, employees, the environment and the North American economy."
But CP officials said the STB's decision was the “right one” for rail shippers, the freight-rail industry and North American economy.
"The STB decision clearly shows that the CN-KCS merger proposal is illusory and not achievable," said CP President and Chief Executive Officer Keith Creel in a press release. "Knowing this, we believe the Aug. 10 CP offer to combine with KCS, which recognizes the premium value of KCS while providing regulatory certainty, ought to be deemed a superior proposal."
Yesterday's STB decision can be downloaded and read here.