CN Matches CP, Letter for Letter

Written by William C. Vantuono, Editor-in-Chief

Letters, Kansas City Southern gets letters. CN President and CEO JJ Ruest has responded to Canadian Pacific President and CEO Keith Creel’s April 21 letter to KCS President and CEO Pat Ottensmeyer and his board of directors with one of his own. Railway Age, the first media outlet to publish Creel’s letter, presents it in full:

Dear Pat and the Other Members of the Board of Directors: 

On Tuesday, I delivered on behalf of Canadian National Railway Company (CN) a compelling proposal for CN to combine with Kansas City Southern (KCS), in which KCS shareholders will receive cash and CN stock valued at $325 per KCS common share, based on trading prices as of April 19, 2021. This proposal represents [more than] $50 per common share of incremental value than that being offered as part of the proposed transaction with Canadian Pacific Railway Limited (CP). 

Rather than acknowledge the clear and substantial superiority of CN’s proposal for KCS shareholders, CP has sought to distract investors and attack CN’s proposal with a variety of inaccurate and unfounded assertions. CP’s claims are not intended to benefit KCS shareholders, but to advance CP’s own interests and to deprive KCS shareholders of the full value for their shares. 

As you know, the railroad regulatory approval condition that is relevant to the KCS shareholders is approval of the voting trust, and CN is proposing to use the identical voting trust that CP has proposed. CN is confident that the Surface Transportation Board (STB) will not subject CN’s proposal to any different standard or scrutiny in approving the voting trust than would be applicable to CP’s proposal. Both voting trusts are equally likely to be approved. CP’s deliberately misleading claims to the contrary are not correct. 

CN’s proposed combination is clearly in the public interest, and will enhance competition and produce substantial benefits for customers, communities and employees. Following the closing of the voting trust, CN is confident that it will be able to effectively address any reasonable remediation concerns and ensure that rail customers and other stakeholders benefit from the proposed combination with KCS. We look forward to sharing our views on these matters with you and your team. 

We are confident that, following completion of your review of our proposal, you will agree to exercise your contractual rights to engage with CN and to give the KCS shareholders the opportunity to receive the benefits of CN’s superior proposal. We look forward to engaging with you and your team in order to finalize the terms of our superior transaction. 

Jean-Jacques Ruest 
President and Chief Executive Officer

Editor’s Note: OK, so who’s going to write the next letter? Warren Buffett? What would he say? Maybe something like, “Guess what guys. I’m buying all three of you. Paying in full. Cashier’s check enclosed. Trust me, I’m good for it! Cheers, Warren. P.S. As of Monday, you report to Katie Farmer.” Just kidding, of course, but you never know … Actually, Katie would be rather adept at running North America’s largest railroad. She already runs the second-largest, right? – William C. Vantuono

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