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CN, KCS Move Closer to Merger

Companies have jointly filed documents with STB to review voting trust

Photo: CN
Photo: CN

CN and Kansas City Southern have jointly filed with the Surface Transportation Board (STB) certain documents requested by the STB in order to allow the body to review the voting trust in connection with the merger agreement between CN and KCS.

With this filing, CN and KCS are one step closer to merging. Both companies are confident that their voting trust will be approved.

In response to the STB’s request for information about KCS’s pre-existing capital allocation policy, CN and KCS also submitted to the STB a verified statement from KCS CFO Michael W. Upchurch.

“The board should expeditiously approve the CN voting trust," said Upchurch. "It is the same as the already approved CP trust. It has the same trustee. The merger agreement provides KCS with financial flexibility and freedom to undertake its capital and maintenance plans. Further, over 1,400 stakeholders have supported the CN-KCS combination so far.”

Upchurch’s statement emphasizes the financial strength of KCS and its capital investment plans during the trust period.

“KCS compares very favorably to other Class I railroads in almost every important financial measure including revenue growth, operating ratio, EBITDA, EPS growth, free cash flow yields, debt leverage ratio, liquidity, interest coverage ratio, and funds from operations to debt ratio," said Upchurch. "Today, KCS generates substantially more cash flow than is required for our annual investment needs. We have more than sufficient access to capital to fund our three year capital investment plan.”

The CN-KCS merger agreement provides KCS with continued flexibility to undertake its capital investment plans, noted Upchurch.

“The merger agreement provides KCS with financial flexibility and freedom to undertake its capital and maintenance plans," he said. "It is designed to preserve KCS’s pre-existing capital allocation policies during the trust period. It is also designed to ensure that during the trust period KCS will continue to have the freedom and the resources to pursue its existing and robust capital expenditure program without interference from CN.

"During the trust period, KCS will have substantial cash, liquidity and access to capital markets not only to meet our planned investment requirements consistent with the plan approved by our Board of Directors previous to any merger agreement with either CP or CN, but also the ability to far exceed that plan if it is necessary to do so.”

As stated in the STB filing, the CN-KCS voting trust has been designed to ensure KCS’s independence and freedom of action during the trust period, and to give CN and KCS the opportunity during the trust period to demonstrate the merits of the CN-KCS combination, which will enhance competition; strengthen the North American rail network; and provide better service and more choice for CN and KCS customers.

The filing made with the STB, as well as additional information about CN’s pro-competitive combination with KCS, is available at

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About CN
CN is a world-class transportation leader and trade-enabler. Essential to the economy, to the customers, and to the communities it serves, CN safely transports more than 300 million tons of natural resources, manufactured products, and finished goods throughout North America every year.

About Kansas City Southern
Headquartered in Kansas City, MO, Kansas City Southern is a transportation holding company that has railroad investments in the U.S., Mexico and Panama.

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