Major CN Rail shareholder against bid for Kansas City Southern
Canadian Pacific Railway Ltd. is making an 11th-hour plea for Kansas City Southern to reject Canadian National Railway Co.'s US$29.8-billion takeover proposal that was recently deemed to be superior.
In a letter to Kansas City Southern's board of directors on Thursday, CP Chief Executive Officer Keith Creel argued that what CN put forward is in fact not superior to the friendly US$25.2-billion arrangement with his railway that was announced on March 21.
"...We could understand how the KCS Board might come to that decision given its fiduciary duties. Nevertheless, we have remained confident that the Surface Transportation Board (STB) would ultimately reject CN's proposal to use a voting trust, given that allowing CN to close into trust would not be in the public interest," Creel wrote in the letter.
He went on to write that there is a "clear path" for KCS's board to step back from its view that CN's proposal is superior, given regulatory risk. He also suggested that CP has no desire to amend the bid that initially won KCS's favour.
"Respectfully, we feel it would be destructive to our mutual interests to engage in a bidding war in reaction to CN's illusory offer, particularly where our existing CP-KCS merger agreement provides KCS's shareholders with a significant premium," Creel wrote.
CP Rail faced a 5 p.m. ET deadline Thursday to formally respond to Kansas City Southern's determination that CN's proposal is superior.
Kansas City Southern, meanwhile, has until 5 p.m. Friday to formally accept CN's offer.
A spokesperson for CN Rail said in a statement the company will “continue to engage constructively with KCS” and that it’s confident the STB will allow its voting trust in order to move forward with a deal.