Kansas City Southern (KCS) has entered into accelerated share repurchase transactions (ASR Transactions) with Goldman Sachs & Co. LLC and Morgan Stanley & Co. LLC for an aggregate amount of $550 million.
The ASR Transactions—which were entered into as part of KCS’s new $2 billion share repurchase program announced on Nov. 12, 2019—are contingent upon the successful closing on or before Nov. 22, 2019, of KCS’s offering of senior notes launched Nov. 14 which targets proceeds of $850 million.
In addition to making payments under the ASR Transactions, net proceeds from the senior notes offering will be used to redeem all, or a portion of, KCS’s and Kansas City Southern de Mexico, S.A. de C.V.’s (“KCSM”) 2.35% senior notes due 2020 and for general corporate purposes.
“On the next business day following the effective date of the ASR transactions (concurrent with the expected closing of the senior notes offering), KCS will pay an aggregate amount of $550 million to Goldman Sachs & Co. LLC and Morgan Stanley & Co. LLC in exchange for the delivery to KCS of approximately 3 million of its shares based on the current market price,” KCS noted in a press release. “The total number of shares ultimately repurchased under the ASR Transactions will be determined upon final settlement and will be based on the volume-weighted average price of KCS’s shares during the applicable valuation period, less a discount. The ASR Transactions are expected to be settled in the first quarter of 2020, subject to market and other conditions.”
“The ASR Transactions we are announcing today, along with our senior notes offering, represent our first steps in executing the new capital allocation policy we announced earlier this week,” said CEO and President Patrick Ottensmeyer. “These transactions demonstrate our plan to prudently and selectively deploy debt in addition to our strong free cash flow to invest in growth opportunities and to return meaningful capital to our shareholders while keeping our balance sheet and credit profile strong.”