By Justin Franz
CALGARY — Canadian Pacific won’t take no for an answer.
More than two months after Kansas City Southern officially rejected CP’s offer to merge — instead going for a perhaps more risky but lucrative deal with Canadian National — the two Class Is are still sparing, with the Canadian road still insisting that its proposal is the superior deal. Last week, CP filed a proxy statement asking KCS shareholders to reject the CN deal. Shareholders are scheduled to vote on the deal later this month.
In the proxy statement, CP officials again said that they did not believe a CN-KCS merger would be approved by the U.S. Surface Transportation Board and that ultimately a CP-KCS would be good for customers and shareholders. Officials also said it would be irresponsible to vote on a merger before knowing if the STB would let CN put KCS into trust pending approval.
“CP has always said it wanted to do a friendly deal with KCS and that remains true,” said Keith Creel, CP President and Chief Executive Officer. “CP would have preferred not to appeal directly to KCS’ stockholders, but given the impending vote on CN’s proposal, we believe we have no choice. What we are doing here is simply contesting the vote on the CN-KCS proposal because a ‘yes’ vote now would lock KCS stockholders in until February 2022, instead of their being free to consider other, better, options. We want to ensure KCS stockholders are aware that a vote today, without the benefit of an STB decision on the CN voting trust proposal and without a chance to consider other proposals until the spring of next year, would not be in their best interests.”
Meanwhile, although KCS has rejected CP’s merger offer, the STB is allowing the Canadian road to keep its merger application open should something change in the future. Because of that, CP has requested information from KCS. The American Class I rejected those requests, stating that the CP-KCS deal was off. However, on Monday, the STB ruled that CP may use “discovery” under the board’s regulations to seek relevant information from KCS. CP hailed that decision as a win.