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KCS Terminates CN Merger Agreement

CN to receive $1.4B in termination fees

Photo courtesy of CN Railway
Photo courtesy of CN Railway

CN has announced that Kansas City Southern has provided notice of termination of the previously announced May 21, 2021 definitive merger agreement with CN.

In connection with KCS’ termination of the CN merger agreement, KCS will pay CN the $700 million cash “Company Termination Fee” as well as the $700 million cash “CP Termination Fee Refund” provided for in the CN merger agreement.

CN is also not obligated to pay any termination fees as a result of the termination of the CN merger agreement.

The notice of termination from KCS follows the mutually agreed early termination of the match period provided for in the CN merger agreement.

While CN continues to believe that a CN-KCS combination would have enhanced competition and delivered many other compelling benefits for stakeholders, there have been significant changes to the U.S. regulatory landscape since CN launched its initial proposal which have made completing any Class I merger much less certain, including an Executive Order focused on competition issued by President Biden in July.

“While we are disappointed that we will not be able to deliver the many compelling benefits of this transaction to our stakeholders, the decision to bid for KCS was a bold and strategic move that still resulted in positive outcomes for CN," says JJ Ruest, president and CEOr of CN.

"We believe that the decision not to pursue our proposed merger with KCS any further is the right decision for CN as responsible fiduciaries of our shareholders’ interests," Ruest continues.

"CN will continue to pursue profitable growth and opportunities for excellence as a leading Class I railroad, and we look forward to outlining more details on our strategic, operational and financial priorities in the near future.”

CN appreciates the broad array of stakeholders who wrote more than 1,750 letters of support for participating in this important engagement process with the Surface Transportation Board (“STB”).

Throughout the proposed merger process with KCS, CN made numerous unprecedented pro-competitive commitments to provide all market participants, railroads and customers with enhanced route choices, pricing transparency and a fair chance to compete.

Given comments made by the STB in its decision on the joint CN-KCS voting trust application, CN firmly believes that no Class I merger with KCS should be approved without those public interest and enhanced competition commitments.

CN will continue to actively participate in this important dialogue to ensure that all regulatory rules are enforced fairly, and customers do not suffer anti-competitive effects arising from a combination between Canadian Pacific and KCS.

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