Thursday, May 20, 2021

CN Rail says Bill Gates and the Caisse support its bid for Kansas City Southern

Wed., May 19, 2021


CAISSE IS THE QUEBEC PENSION PLAN = CPP IN ROC



Canadian National Railway Co. says its push to create a continental railway with the US$33.6-billion acquisition of Kansas City Southern has the backing of Bill Gates and the Caisse de depot et placement du Quebec.

"It's time to be bold and create the 21st Century railroad," CEO JJ Ruest told an investor conference on Wednesday.

"It will be a transformative combination to the benefit of both companies shareholders, customers and communities."

Ruest said there's "great enthusiasm" for creating a railway servicing the U.S., Mexico and Canada that is more competitive than trucking.

He said most of its shareholders support the combination despite concerns raised by its fifth-largest shareholder, Britain's TCI Fund Management.

He pointed to public support from Cascade Investment LLC, controlled by Bill Gates, and the Quebec pension fund manager.

Kim Thomassin, the head of investments for the Caisse, said in a letter that it believes the deal has the potential to "not only create jobs in a company based in Montreal, but also to open new markets to Quebec export companies and stimulate the economic recovery as a whole."

"This acquisition is in line with CDPQ’s objectives to support both Quebec companies in their international growth and the transition toward a low-carbon economy," Thomassin wrote.

The Caisse is CN Rail's ninth-largest investor with a 1.7 per cent stake, according to financial data firm Refinitiv.

Cascade Investment is the largest with a 14.3 per cent stake. TCI Fund holds a 2.9 per cent interest.

On Tuesday, TCI, who is also CP Rail's largest shareholder, urged CN's board to drop its bid for KCS because of the sizable break fee CN Rail would be forced to pay if its voting trust is not approved by the U.S. railway regulator.

"Making what is essentially a C$2 billion bet with company money on this one, unknowable, decision would be extremely reckless," TCI wrote in a letter to CN's board of directors.

Ruest said the company discussed the transaction even before its offer was made.

"We welcome the feedback and the view of all of our shareholders, most of them actually are very excited about the combination and what it could do to make the company much more valuable in the long-term," he told the Bank of America Securities transportation, airlines and industrials conference.

Canadian Pacific Railway CEO Keith Creel is expected to laud the benefits of its own offer and criticize its Canadian rival's bid Thursday when he appears at the conference. The Calgary-based railway has until Friday to decide whether to increase its offer for KCS.

Ruest said the combined railway network will provide more options for railway customers and generate more than the $1 billion in synergies it originally estimated.

The chief executive also said he's confident that the U.S. railway regulator, the Surface Transportation Board, will ultimately endorse the deal once its conducts a full review of its voting trust and imposes certain conditions.

"Our strong balance sheet, cash flows, financial outlook and industry leading rating profile will provide certainty that we have the financial strength to satisfy the STB public interest analysis."

The STB said CN's bid would be evaluated on stricter merger criteria created in 2001 whereas CP Rail received a waiver for its alternative offer.

CN expects a KCS shareholder vote on its offer in early July, approval and closing of its voting trust in the second half of the year and final STB approval in late 2022 or early 2023.

This report by The Canadian Press was first published May 19, 2021.

Companies in this story: (TSX:CNR, TSX:CP)

Ross Marowits, The Canadian Press


No comments:

Post a Comment