Benzinga | Sep 15, 2021 08:49AM EDT

Kansas City Southern Terminates Canadian National Railway Merger Agreement And Is Entering Into Merger Agreement With Canadian Pacific Railway

Kansas City Southern (NYSE:KSU) ("KCS") today announced that the Company's Board of Directors, in consultation with its financial and legal advisors, has unanimously determined that the acquisition proposal KCS received from Canadian Pacific Railway Limited (TSX:CP, NYSE:CP) ("CP") on September 12, 2021 continues to constitute a "Company Superior Proposal" under KCS's pending merger agreement with Canadian National Railway Company (TSX:CNR, NYSE:CNI) ("CN"). KCS also announced that it entered into a waiver letter agreement today with CN under which CN agreed to waive the five-business day match period under the CN merger agreement and KCS agreed to terminate the CN merger agreement today.

Following the KCS Board's determination and the execution of the waiver letter, KCS terminated the CN merger agreement and is entering into a merger agreement with CP. Under the terms of the CP merger agreement, upon closing of CP's voting trust, each share of KCS common stock will be exchanged for $90 in cash and 2.884 shares of CP common stock. In addition, holders of KCS preferred stock will receive $37.50 in cash for each share of KCS preferred stock held. Closing will be subject to approval by the stockholders of CP and KCS, receipt of regulatory approvals and other customary closing conditions.

In connection with the termination of the CN merger agreement, KCS is paying CN a breakup fee of $700 million and will also pay CN an additional $700 million in return of the $700 million previously paid by CN to KCS to reimburse the termination fee paid to CP in May. Both of these payments will be reimbursed to KCS by CP. KCS will be obligated to refund CP's reimbursement under certain limited circumstances, including if KCS terminates the CP merger agreement to accept a superior proposal. In light of the termination of the CN merger agreement, KCS has cancelled the previously announced Special Meeting of Stockholders for KCS stockholders on September 24, 2021 to vote on the CN merger agreement. KCS will schedule a new Special Meeting of Stockholders for KCS stockholders to vote on the CP merger agreement in due course.

KCS and CP will be jointly issuing a separate press release with respect to the KCS-CP transaction.

BofA Securities and Morgan Stanley & Co. LLC are serving as financial advisors to Kansas City Southern. Wachtell, Lipton, Rosen & Katz, Baker & Miller PLLC, Davies Ward Phillips & Vineberg LLP, WilmerHale, and White & Case, S.C. are serving as legal counsel to Kansas City Southern.