The unfolding of the Kansas City Southern takeover saga

The unfolding of the Kansas City Southern takeover saga

Kansas City Southern (KSU.N) said it planned to accept Canadian Pacific Railway Ltd’s (CP.TO) $27.2 billion cash-and-stock acquisition offer as superior to its $29.6 billion deal to sell itself to Canadian National Railway Ltd (CNR.TO).

This comes after the U.S. Surface Transportation Board (STB) rejected a temporary “voting trust” structure last month that would have allowed Kansas City Southern shareholders to receive the $325-per-share cash-and-stock consideration under the deal with Canadian National without having to wait for full regulatory approval.

Below are the events that unfolded over several months as Canadian National and Canadian Pacific locked horns to take control of Kansas City Southern to create the first railway spanning the United States, Mexico and Canada, as they stand to benefit from a pick-up in trade.

MARCH 21: CANADIAN PACIFIC AGREES TO ACQUIRE KANSAS CITY SOUTHERN

Canadian Pacific agreed to acquire Kansas City Southern in a $25 billion cash-and-stock deal, which would be the largest ever combination of North American railways by transaction value.

MARCH 22: FARM GROUPS SHOW SUPPORT FOR CP-KCS DEAL

Farm groups said Canadian Pacific’s deal to buy Kansas City Southern would create a rail network from Canada to Mexico that could smooth the flow of their goods to market.

APRIL 20: CANADIAN NATIONAL TRUMPS CP’S OFFER

Canadian National offered to buy Kansas City for about $33.7 billion, trumping Canadian Pacific’s buyout offer for the railroad operator. Canadian National said it was willing to match the terms of Canadian Pacific’s offer for Kansas City Southern.

APRIL 21: CN KICKS OFF REGULATORY APPROVAL PROCESS FOR KCS DEAL

Canadian National informed the Surface Transportation Board (STB), which oversees freight rail service and rates in the United States, that it planned to file an application, seeking permission to combine with Kansas City Southern.

APRIL 21: CANADIAN PACIFIC RULES OUT RAISING BID FOR KCS

Canadian Pacific’s Chief Executive Keith Creel said the company would not raise its bid for Kansas City Southern and that bigger rival Canadian National’s offer is “not a real deal”. Creel said the company was not ready to put its “balance sheet at risk.”

APRIL 22: CN SHOWS CONFIDENCE IN DEAL GETTING APPROVAL

Canadian National informed Kansas City Southern’s board about its confidence in winning regulatory approvals for its offer for the U.S. railroad.

APRIL 23: LAWMAKER WARNS AGAINST RAILROAD CONSOLIDATION

Senior U.S. lawmaker said the potential acquisition of the Kansas City Southern should set off “alarm bells” about industry consolidation, warning Wall Street would make money from railroad consolidation, but the U.S. economy and workforce will suffer.

APRIL 24: U.S. REGULATOR GIVES CP EARLY WIN IN TAKEOVER WAR

The STB granted a waiver to Canadian Pacific’s bid for Kansas City Southern, which means the deal would not be subjected to the tougher railroad merger rules the regulator put in place in 2001. At the same time, Kansas City Southern said its board had determined that a competing offer from Canadian National could be expected to lead to a “superior proposal.”

APRIL 26: RAIL CUSTOMERS PICK SIDES IN THE TAKEOVER WAR

North America’s freight rail customers, from grain shippers to logistics companies, chose sides as the takeover war continued. Canadian National filed 409 letters of support with the STB, almost at par with Canadian Pacific’s stated level of support. Some companies like Coca-Cola Co (KO.N) and Conagra (CAG.N) were publicly supporting both rail bids.

MAY 1: CP OBJECTS TO CANADIAN NATIONAL’s BID

Canadian Pacific filed a formal objection stating Canadian National’s rival bid for Kansas City does not qualify to be exempted from tougher merger rules as the CN-KCS deal would greatly expand the size of the fifth largest U.S. Class 1 railroad.

MAY 6: STB APPROVES CP’S VOTING TRUST FOR KCS DEAL

The STB approved the voting trust for Canadian Pacific’s proposed acquisition of Kansas City. Canadian Pacific had earlier agreed to bear most of the risk of the merger deal not going through. Canadian Pacific was going to buy Kansas City shares and place them in an independent voting trust, insulating the acquisition target from its control until the STB cleared the deal.

MAY 13: KCS DECLARES CN BID SUPERIOR TO CP DEAL

Kansas City Southern accepted Canadian National’s bid, leaving Canadian Pacific with five business days to make a new offer. If Canadian Pacific were to table a new offer, a bidding war could ensue.

MAY 14: DOJ SAYS CANADIAN NATIONAL BID A GREATER RISK TO COMPETITION

The U.S. Department of Justice said Canadian National’s bid for Kansas City Southern appears to pose greater risks to competition than an agreement with Canadian Pacific.

MAY 18: SHAREHOLDER URGES CANADIAN NATIONAL TO AMEND KANSAS CITY SOUTHERN DEAL

Billionaire hedge fund manager Chris Hohn urged Canadian National Railway to abandon its bid for Kansas City Southern unless the Canadian railroad operator changed its agreement to drop a key feature that could invite more regulatory scrutiny.

MAY 20: CANADIAN PACIFIC ASKS KANSAS CITY SOUTHERN TO REJECT RIVAL OFFER

Canadian Pacific asked the U.S. railroad operator to reject rival Canadian National Railway’s takeover offer, saying there was no longer any basis to terminate the CP-KCS agreement.

MAY 21: KANSAS CITY SOUTHERN STICKS TO CANADIAN NATIONAL OFFER

Kansas City Southern reiterated that Canadian National Railway’s offer was “superior”.

MAY 26: CANADIAN NATIONAL TO DIVEST KANSAS CITY SOUTHERN’S 70-MILE RAIL OVERLAP

Canadian National Railway agreed to divest Kansas City Southern’s 70-mile rail line between New Orleans and Baton Rouge to eliminate the only overlap between the two railroad operators.

AUG. 10: CANADIAN PACIFIC CHALLENGES CANADIAN NATIONAL WITH $27 BLN KANSAS CITY SOUTHERN BID

Canadian Pacific presented a new $27 billion offer for U.S. peer Kansas City Southern.

AUG. 12: KANSAS CITY DOES NOT RECOMMEND CANADIAN PACIFIC’S NEW PROPOSAL, STICKS WITH CN

Kansas City Southern’s board determined that the unsolicited proposal received from Canadian Pacific Railway does not constitute a “superior proposal” to its agreement with Canadian National.

AUG. 12: KANSAS CITY SOUTHERN TO DELAY CANADIAN NATIONAL DEAL VOTE

Kansas City Southern said it would delay a shareholder vote on its deal to sell itself to Canadian National if the STB has not delivered its decision by Aug. 17.

AUG. 31: STB REJECTS CANADIAN NATIONAL’S VOTING TRUST STRUCTURE

STB rejected Canadian National’s voting trust structure that would have allowed the railroad to proceed with its $29 billion proposed acquisition of Kansas City Southern.

SEPT. 1: KANSAS CITY SOUTHERN PUTS OFF SHAREHOLDER MEET

Kansas City Southern to adjourn a shareholders meeting that was set to vote on its deal with Canadian National Railway. The railroad operator did not specify when the rescheduled meeting would be held. Additionally, the company said it was working with Canadian National to evaluate the options available and would re-evaluate Canadian Pacific’s offer.

SEPT. 1: CP CHIEF UNLIKELY TO OFFER KANSAS CITY $300/SHARE AFTER SEPT. 12 DEADLINE

Canadian Pacific Railway CEO said the company would not be as willing to offer Kansas City $300 per share should the U.S. railroad operator’s board fail to decide on the offer by its Sept. 12 deadline.

SEPT. 4: KANSAS CITY SOUTHERN TO BEGIN TALKS WITH CANADIAN PACIFIC RAILWAY

Kansas City Southern said it will initiate talks with Canadian Pacific as CP’s unsolicited proposal to acquire it could reasonably be expected to lead to a better proposal than one made by Canadian National Railway.

SEPT. 7: CANADIAN NATIONAL SHAREHOLDER TO NOMINATE FIVE DIRECTORS TO COMPANY’S BOARD

Billionaire Chris Hohn’s TCI Fund Management said it intends to nominate directors to replace about half of Canadian National’s board, after its costly attempts to buy Kansas City Southern were dealt a blow by the U.S. regulator.

SEPT. 12: KANSAS CITY SOUTHERN PLANS TO ACCEPT CANADIAN PACIFIC’S BID

Kansas City Southern said it planned to accept Canadian Pacific Railway Ltd’s $27.2 billion cash-and-stock acquisition offer as superior to its $29.6 billion deal to sell itself to Canadian National Railway.

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