KCS Board Votes to Accept CN Offer

Kansas City Southern on Friday decided to go with Canadian National and leave Canadian Pacific a jilted partner.

The KCS board of directors unanimously terminated its earlier merger agreement with CP and entered into a merger agreement with CN.

CN has offered KCS shareholders $200 cash for each share of stock and 1.129 shares of CN common stock.

That places the value of a share of KCS stock at $325 based, on the March 19 closing price or a 45 percent increase in value.

March 19 was the last day KCS shares traded publically before the CP acquisition was announced.

KCS stock holders must still approve the CN transaction, which also is contingent on the U.S. Surface Transportation Board agreeing to the placement of KCS into a voting trust as proposed by CN.

CP will be paid a breakup fee of $700 million that CN has agreed to pay.

In response CP sent a letter to the STB seeking review of an application to control KCS.

That letter laid out why CP believes its offer is in the best interests of KCS and the public so that the “pro-competitive” CP+KCS combination can proceed to be reviewed.

“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.

CN plans to submit to the STB on Monday its request to place KCS into a voting trust while the merger is under regulatory review.

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