Canadian National Railways Update
Sign up for myFT Daily Digest and be the first to learn about Canadian National Railways news.
British hedge fund manager Chris Horn asked National Bank of Canada to abandon its $34 billion acquisition of southern Kansas City after the US railroad regulator rejected the way the deal was structured because it might harm the public interest.
In a letter to the CN board seen by the Financial Times, the head of TCI is one of the largest companies. shareholder The Montreal-based company holds a 5% stake valued at approximately US$4 billion and also asked CN Chairman Robert Pace and CEO Jean-Jacques to resign. TCI recommended Jim Vena, who had worked in CN and competitor United Pacific in the past, as the person to run the company.
The activist investor’s move was decided by the U.S. Ground Transportation Commission Refuse CN requires the establishment of a temporary voting trust, according to which KCS shareholders will be paid before the transaction is fully approved by the regulator. CN shares rose 7.3% on Tuesday.
CN and KCS can still choose to trade without using voting trusts, but the decision of the regulator may completely derail the transaction, as the shareholders of this American company are more likely to support an alternative union with rival Canadian Pacific Railway Group .
“CN should immediately withdraw from the agreement with KCS,” Horn told the Financial Times. “The CN board should not continue to operate without a voting trust, because it will cause huge value damage, loss of billions of dollars in default fees, and distract management when the business is performing poorly.
“The CN board has been wrongly judging the set-top box, and the board’s prediction has been wrong. The result is [CN] The board now lacks all credibility, so the chairman and CEO should resign,” Horn added.
CP had previously reached an agreement to acquire KCS, but it was later terminated after the American company received a better offer from CN. CP made a new offer to buy KCS in early August Valued at approximately US$31 billion, Including debt, because it expects that STB will refuse to use voting trust for CN.
“STB’s decision clearly shows that the CN-KCS merger proposal is illusory and cannot be realized,” said CP CEO Keith Creel. “Knowing this, we believe that the CP proposal on August 10 combined with KCS, KCS recognizes the premium of KCS while providing regulatory certainty, and should be regarded as a better proposal.”
CN did not immediately comment on the matter.
TCI is also the largest shareholder of CP, owning 8.4% of the shares. Hedge fund managers support transactions between CP and KCS, because a merger between the two smallest players in the industry will be more likely to receive regulatory approval. The merger of KCS and CN will create the third largest rail operator in North America.
The fierce acquisition battle of this American freight railroad company highlights the importance of KCS to the two Canadian companies because it allows both parties to connect their existing business from Canada to Mexico through the United States. Cross-border trade It is expected to rebound sharply.
Under the terms of the US$34 billion agreement, CN may be forced to pay a US$1 billion termination fee, but this fee can be waived if the two parties agree to part ways amicably.