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Kansas City Southern responds to CP proxy statement

Rail News Home Kansas City Southern 8/2/2021 Rail News: Kansas City Southern
image Kansas City Southern today responded to Canadian Pacific's filing last week of a preliminary proxy statement seeking votes against the CN-KCS merger proposal. In a prepared statement, KCS officials said that CP's filing "is part of an effort to defeat a transaction that offers KCS shareholders $50 per share more than CP was willing to offer." In May, CP decided not to take advantage of its five-business-day match right, per the terms of its initial merger contract, to compete with CN’s superior proposal. Since that time, CP has consistently criticized the CN-KCS combination, KCS officials said. KCS officials also noted that, even though CP claims in its latest filing that its "ready to re-engage with KCS," CP has not made a new proposal. "Nor did it commit to making one in the future," they said, adding that there can be no assurances that CP will make an offer or proposal to KCS. KCS continues to recommend that its shareholders vote in favor of the CN combination. KCS's full statement is available here.

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KCS posts revenue gain, net loss in Q2

Kansas City Southern posted second-quarter 2021 revenue of $749.5 million, a 37% increase from the same period a year ago. Overall, carload volumes were up 31% compared to the prior year.

KCS attributed the revenue increase primarily to higher volumes, a higher fuel surcharge and the strengthening of the Mexican peso against the U.S. dollar.

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KCS sets stockholder meeting date for CN merger vote

Rail News Home Kansas City Southern 7/8/2021 Rail News: Kansas City Southern
image Kansas City Southern has scheduled for Aug. 19 a virtual special meeting of stockholders to vote on the proposed merger with CN. All stockholders of record of KCS common stock and 4% non-cumulative preferred stock as of the close of business on July 1, 2021, will be entitled to vote their shares at the special meeting, KCS and CN officials said in a press release. As previously announced on May 21, under the terms of the agreement KCS stockholders will receive $200 in cash and 1.129 shares of CN common stock for each KCS common share, with KCS stockholders expected to own approximately 12.65% of the combined company. KCS' preferred stockholders will receive $37.50 in cash for each preferred share. Additional information regarding the combination can be found in the definitive proxy statement that has been filed with the U.S. Securities and Exchange Commission. The KCS board unanimously recommends that stockholders vote for the merger agreement with CN and the other proposals outlined in the definitive proxy statement. CN will acquire KCS shares and place them into a voting trust if such trust is approved by the Surface Transportation Board (STB). KCS stockholders would receive the merger consideration immediately upon the closing into CN’s voting trust, which is expected to be in the second half of 2021, the companies said. Following that step, the STB and other regulatory authorities would complete their review of CN's control of KCS. Upon approval, the completion of the transaction to take the KCS shares out of the voting trust is expected to take place in the second half of 2022, they said. CN's prospectus and KCS' definitive proxy materials can be found on the SEC's website. The proxy materials are being mailed to all stockholders eligible to vote at the special meeting. Meanwhile, Canadian Pacific issued a statement in response to CN's recent filing with the STB replying to the many comments opposing CN's proposed voting trust. "CN's reply doubles down on arguments for a voting trust that CP has already shown do not meet the board's public interest test and sweeps under the rug the many public interest costs associated with CN's proposed use of a trust," CP officials said in their statement, which can be read here.

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KCS lists 2020 sustainability achievements in new report

Rail News Home Kansas City Southern 7/2/2021 Rail News: Kansas City Southern
image Kansas City Southern yesterday released its 2020 sustainability report titled "For the Long Haul: Delivering Prosperity, Valuing People, Protecting the Planet." Available in the corporate responsibility section of kcsouthern.com, the report shows KCS in 2020: • improved its U.S. and Mexico consolidated frequency rate of reportable workplace injuries and illnesses by 27%;
• committed to do its part in the fight against climate change and partnered with the Science Based Target Initiative to set an ambitious carbon-reduction target. KCS has committed to reducing its scope 1 and 2 greenhouse gas emissions per million gross ton-miles at least 42% by 2034, from a 2019 base year;
• avoided the use of 21.2 million gallons of diesel fuel; this is an additional nearly 7 million gallons avoided compared to 2019 due to the implementation of fuel-efficient technologies; and
• held 24 diversity, equity and inclusion roundtable sessions across the United States and Mexico with its President and Chief Executive Officer Patrick Ottensmeyer and more than 200 participants. The forum provided employees a space to share their views on workplace equity, inclusion and opportunities for KCS improvements. The report follows the Global Reporting Initiative's latest standards for disclosing governance, economic, social and environmental topics and is in alignment with the Sustainability Accounting Standards Board and Task Force on Climate-related Financial Disclosures frameworks. The frameworks provide for the disclosure of measurable data and specific information related to sustainability, KCS officials said in a press release.

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CN-KCS: Merger would offer choices to grain shipper

Rail News Home Kansas City Southern 6/25/2021 Rail News: Kansas City Southern
image CN and Kansas City Southern today highlighted what they describe as the benefits realized by grain customers, including farmer-owned grain co-operatives, through CN’s open gateways commitment in the CN-KCS combination. These stakeholders, including agricultural customers in the upper midwestern United States, would benefit from a choice of routes and competitive rates, better service and innovation resulting from the competition for their business, the two Class Is said in a press release. Their statement comes a day after Canadian Pacific announced that shippers of grain and other agricultural products across North Dakota, South Dakota and Minnesota have submitted letters to the Surface Transportation Board (STB) opposing CN's and KCS's combination, its use of a voting trust, or both. The letters describe how a potential CN-KCS combination and its proposed use of a voting trust would see reduced options for agricultural shippers in the Upper Midwest leaving them fewer direct competitive options, and eliminating the new network of shipping options a CP-KCS combination would create, CP officials said in a press release. Meanwhile, CN President and Chief Executive Officer JJ Ruest and KCS President and CEO Patrick Ottensmeyer yesterday co-authored an op-ed published in The Hill in which they explained why they believe the CN-KCS merger would supply critical infrastructure to shorten supply chains. The full Ruest/Ottensmeyer op-ed can be read here.

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Merger pros and cons: CN, KSC, CP tout letters that support their own positions

Rail News Home Kansas City Southern 6/21/2021 Rail News: Kansas City Southern
image Canadian Pacific today announced that more than 80 additional stakeholders have filed statements with the Surface Transportation Board (STB) expressing concerns about CN and Kansas City Southern's combination, its use of a voting trust or both. The latest statements bring the total opposed to more than 330, CP officials said in a press release. Together, more than 1,050 letters have been filed in support of CP's proposed combination with KCS or in opposition to the CN proposal. The letters highlight the extensive risks the proposed CN-KCS voting trust poses to competition by reducing shipper options, CP officials said. Stakeholders also expressed strong concerns about the likelihood of reduced service quality and infrastructure investments as a result of the proposed merger. Meanwhile, last week CN and KCS announced that an additional 100 letters in favor of their proposed combination were filed with the STB, bringing the total number of support letters that CN and KCS have received to greater than 1,500. Of the 100 or so filed last week, 90 of the letters support CN's and KCS's request that the STB approve their proposed voting-trust agreement.

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CN, KCS respond to STB request for more documents

Rail News Home Kansas City Southern 6/16/2021 Rail News: Kansas City Southern
image CN and Kansas City Southern yesterday announced that they jointly filed certain documents requested by the Surface Transportation Board (STB) to enable the STB to review the voting trust proposal as part of the CN-KCS merger agreement. With this filing, CN and KCS are one step closer to creating their merged railway. CN and KCS look forward to the STB’s review and are confident that their voting trust will be approved, officials with both organizations said in a press release. 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 statement from KCS Chief Financial Officer Michael Upchurch. In his statement, Upchurch emphasized the financial strength of KCS and its capital investment plans during the trust period. The STB filing, as well as additional information about CN’s pro-competitive combination with KCS, is available at www.ConnectedContinent.com. Meanwhile, Canadian Pacific announced yesterday that North America's largest railroad operating union, SMART-Transportation Division (SMART-TD), has submitted a letter urging the STB to reject CN’s proposed use of a voting trust in its KCS merger agreement. In contrast, the SMART-TD letter stated of CP’s proposed combination with KCS: “We anticipate growth in both rail businesses and jobs for SMART-TD members." CP continues to make a public case for its proposal to merge with KCS, which initially agreed to combine with CP but then pulled out of the pact to pursue a merger agreement with CN

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STB issues timetable for CN-KCS voting trust review

Rail News Home Kansas City Southern 6/9/2021 Rail News: Kansas City Southern
image The Surface Transportation Board (STB) yesterday issued a timetable for reviewing the voting trust in connection with the proposed merger between CN and Kansas City Southern. The timetable calls for the Class Is to file specific documents by June 14 and requires comments on the voting trust agreement by June 28, with replies due July 6. CN and KCS officials say their proposed voting trust is "identical" to the trust approved in Canadian Pacific's proposed acquisition of KCS. Earlier this year, CP and KCS had reached an agreement for a merger, but KCS pulled out of that agreement after receiving a "superior proposal" from CN. "As CN and KCS explained in their May 26, 2021, motion for voting trust approval, the CN-KCS combination offers multiple public interest benefits, including seamless single-owner, single-operator service, new and faster routes, significant environmental protections and increased supply chain efficiency," CN and KCS said in a press release. Meanwhile, CP officials said the company will file comments by June 28 that explain "why the public interest costs of CN's proposed voting trust outweigh the non-existent benefits." CP remains "confident" that the STB will ultimately reject CN's proposal to use a voting trust in its KCS merger plan."CN's arguments in favor of a trust amount to the claim that CN and KCS should be able to decide what is in the public interest based on which railroad is offering more money to acquire KCS – that argument elevates private interests over the public interest," CP officials said in a press release. The STB's decision setting the timetable may be read here.

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Merger update: CN, KCS file with STB for voting trust approval

CN and Kansas City Southern today jointly filed with the Surface Transportation Board (STB) a renewed motion for approval of its voting trust that outlines the case for approval of the voting trust to advance the CN-KCS merger.

The filing highlights that the voting trust protects against premature control of KCS and protects KCS’ financial health, that CN remains financially sound, the substantial benefits to be gained from the transaction by customers and the nearly 1,100 stakeholders who have already supported the transaction.

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Merger mayhem: CN ups KCS offer; CP seeks to respond

Rail News Home Kansas City Southern 5/14/2021 Rail News: Kansas City Southern
image CN has sweetened its offer to acquire Kansas City Southern. Under terms of its revised proposal, CN now would exchange each share of KCS common stock for $200 in cash and 1.129 shares of CN common stock, implying a total enterprise value of $33.6 billion. CN also has agreed to reimburse KCS $700 million in connection with a termination fee it would need to pay Canadian Pacific under their merger agreement if that deal is called off. As a result, KCS’ board has determined that CN’s revised proposal constitutes a “company superior proposal” as defined in KCS’s merger agreement with CP. KCS notified CP that it intends to terminate their merger agreement and enter into a definitive agreement with CN. CP retains the right to negotiate merger agreement amendments for at least five business days, and KCS’ board still could make a further determination as to whether any such amendments would cause the CN proposal to no longer constitute a company superior proposal. “We are delighted that KCS has deemed [our] binding proposal superior, recognizing the many compelling benefits of our combination and expressing confidence in CN’s ability to obtain the necessary approvals and successfully close the transaction,” said CN President and Chief Executive Officer JJ Ruest in a press release. “Our proposal offers a clear path to completion and is structured in a way that gives KCS shareholders both greater immediate value and the opportunity to participate in the future upside of the combined company.” CP plans to respond to KCS about any merger agreement amendments within the allotted time, CP officials said in a statement. It isn't surprising that CN would raise its offer, which highlights that railroad's recognition of the significant regulatory risks and challenges associated with "its anti-competitive bid,” CP officials said. “There is nothing new here; this doesn't make it any more likely that the CN proposal can close into a voting trust. The Surface Transportation Board already approved CP's use of a voting trust for its pro-competitive combination with KCS,” they said. “We believe that CP's negotiated agreement with KCS is the only true end-to-end Class I combination that is in the best interests of North American shippers and communities. As we've said repeatedly, we are not going to enter into a bidding war.” CP officials believe the mutually negotiated agreement with KCS represents compelling short- and long-term value for shareholders that’s actually achievable.

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KCS promotes Livingston to VP, urges shareholders to reject TRC offer

Rail News Home Kansas City Southern 5/13/2021 Rail News: Kansas City Southern
image Kansas City Southern has promoted Timothy Livingston from general manager of network operations to vice president of transportation for the company’s operations in the United States and Mexico. Livingston joined KCS as a conductor in 2004 and has held transportation management positions in Arkansas, Louisiana, Texas, Oklahoma and Missouri before being promoted to GM of network operations. "Throughout the evolution of KCS’ implementation of precision scheduled railroading, Tim has consistently demonstrated tremendous leadership," said KCS Executive VP of Operations John Orr in a press release. "He has a keen understanding of the value of a speak-up culture and operational balance, and how these elements lead to growth." Meanwhile, KCS earlier this week announced that it received notice of an unsolicited mini-tender offer by TRC Capital Investment Corp. to purchase up to 500,000 shares, or approximately 0.55%, of KCS’s outstanding common stock at a price of $285 per share in cash. As TRC Capital's own offer document acknowledges, the offering price is approximately 2.47% below the closing price per share of KCS on April 30, 2021, the last trading day before the mini-tender offer was commenced, KCS officials said. The officials also said the company does not endorse TRC Capital’s mini-tender offer and recommends that KCS shareholders reject the unsolicited offer and not tender their shares in response to the offer. Moreover, KCS recommends that any shareholders who have tendered shares to TRC Capital withdraw those shares by providing the written notice described in the offering documentation before the offer expires June 2.

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CP objects to CN using merger waiver that STB granted to CP-KCS deal

Rail News Home Kansas City Southern 5/3/2021 Rail News: Kansas City Southern
image Canadian Pacific late last week filed a formal objection with the Surface Transportation Board (STB) stating that CN does not qualify for a waiver of the STB's rules for major transactions with respect to CN's proposal to acquire Kansas City Southern. In its letter, CP states that the CN-KCS transaction does not satisfy the criteria that the STB relied upon in finding that the waiver should apply to a CP-KCS transaction, which the STB granted on April 23. Meanwhile, in other developments:
• CN today issued an open letter to the KCS community regarding CN’s proposal to combine with KCS. The letter outlines why CN believes a combined CN-KCS represents the best solution for all stakeholders and sets the record straight on the merits of the proposal.
• CP today announced that more than 110 customers and other stakeholders have filed letters with the STB to express concerns about and/or opposition to CN’s proposal for KCS. The letters from customers and other stakeholders highlight growing concerns that the CN-KCS combination would reduce competition in the Canada-U.S.-Mexico corridor, CP officials said in a press release.
• CN late last week announced that more than 200 additional letters in favor of its proposed KCS combination have been filed with the STB, bringing the total number of support letters CN has received to more than 600 in just over a week since its proposal was made public. That number exceeds the number of letters that CP has received in over five weeks, CN officials said in a press release.

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KCS posts lower revenue in Q1, names Songer and Orr EVPs

Kansas City Southern last week reported first-quarter 2021 revenue of $706 million, down 4% from the same period a year ago.

Overall, carload volumes were down 1% compared with volumes in Q1 2020, KCS officials said in a press release.

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KCS rejects takeover bid, report says

Rail News Home Kansas City Southern 9/11/2020 Rail News: Kansas City Southern
image Kansas City Southern has rejected a $20 billion takeover offer from an investor group, the Wall Street Journal reported Wednesday. Global Infrastructure Partners and the infrastructure arm of private-equity firm Blackstone Group Inc. offered KCS $208 a share, the paper reported, citing people familiar with the situation. KCS rejected the bid, arguing it undervalued the company. KCS turned away an earlier bid that was below $200 a share. The two sides are not in discussions, the paper reported.

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KCS Holiday Express train won't run in 2020

Rail News Home Kansas City Southern 9/9/2020 Rail News: Kansas City Southern
image The KCS Holiday Express project's charitable component has raised more than $2.1 million over the past 19 years.Photo – Kansas City Southern

Kansas City Southern has canceled this year's Holiday Express train due to the pandemic, but the railroad will mark the charitable program's 20th year with a fundraiser to benefit The Salvation Army in 20 communities along the KCS network.

"While it is not safe to gather for free visits with Santa Claus and tours of the Holiday Express train this year, the need for the charitable component of this program is greater than ever," KCS President and Chief Executive officer Patrick Ottensmeyer said in a press release.

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Kansas City Southern earns recognition for logistics quality

Rail News Home Kansas City Southern 8/21/2020 Rail News: Kansas City Southern
image Logistics Management magazine has presented a 2020 Quest for Quality award to Kansas City Southern, the Class I announced earlier this week. KCS earned recognition as this year's rail/intermodal service provider winner in the categories of on-time performance and customer service, and was tied for the top spot in equipment and operations. To determine award winners, the magazine's readers evaluate companies in all modes and service disciplines, choosing top performers in such categories as railroad and intermodal services. Transportation service providers are rated on five key criteria: on-time performance, value, information technology, customer service, and equipment and operations. "A core part of the KCS vision is to be the most-customer focused transportation service provider in North America, so this validation from our customers is important," said KCS Executive Vice President and Chief Marketing Officer Mike Naatz in a press release.

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Report: Private-equity firms discuss bid for KCS

Rail News Home Kansas City Southern 8/4/2020 Rail News: Kansas City Southern
image A consortium of private equity investors is considering a possible takeover bid for Kansas City Southern, the Wall Street Journal reported July 28. The newspaper reported that the Blackstone Group Inc. and Global Infrastructure Partners are exploring a potential buyout that could be worth more than $21 billion. The firms together are exploring a potential deal and speaking to banks, including Citigroup Inc., about financing, people familiar with the matter told the newspaper. The deal provides a bet on the increase in U.S.-Mexico trade, given that KCS' rail network operates in both countries, the paper reported. KCS was the subject of merger or acquisition rumors a month ago, Seeking Alpha reported. KCS President and Chief Executive Officer Patrick Ottensmeyer addressed the earlier media reports in response to a question during a July 17 conference call with analysts following the company's second-quarter financial report. Those media reports appeared to becoming out of Europe or London, Ottensmeyer said. "Obviously, you know, the standard answer is no comment on things like that," Ottensmeyer said, according to a transcript of the call. "But the story behind that is that we've got a terrific plan, we've got outstanding opportunities, we have a lot of runway to have a successful run as a independent, standalone publicly traded company and that's our focus and that's what we're going to do."  

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Trump signs KCS permit for second international rail bridge in Laredo

Rail News Home Kansas City Southern 8/3/2020 Rail News: Kansas City Southern
image The new structure will be a single-track span immediately adjacent to the existing U.S.-Mexico bridge in Laredo, Texas.Photo – KCS

President Donald Trump has approved a permit to allow Kansas City Southern to build an additional, parallel bridge span next to its existing international rail bridge in Laredo, Texas.

The Class I applied for the permit with the U.S. Department of State in March.

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KCS updates 2019 sustainability report

Rail News Home Kansas City Southern 7/7/2020 Rail News: Kansas City Southern
image The railroad has updated its 2019 sustainability report entitled "For the Long Haul: Delivering Prosperity, Valuing People, Protecting the Planet."Photo – KCS

Kansas City Southern in late June released an update to its 2019 sustainability report.

Safety statistics shared annually in sustainability reports now will include data from KCS’ Mexican operations, the update states. Titled "For the Long Haul: Delivering Prosperity, Valuing People, Protecting the Planet,” the 2019 report now shows the Class I improved its consolidated reportable train accident frequency ratio by 26 percent and consolidated reportable injury frequency ratio by eight percent.

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KCS to hike train speed near Barksdale Air Force Base

Rail News Home Kansas City Southern 4/6/2020 Rail News: Kansas City Southern
image Kansas City Southern will increase train speed from 20 mph to 49 mph on 1.8 miles of track between Benton Road Overpass and the west gate of Barksdale Air Force Base in Bossier City, Louisiana, by mid-May, the Class I announced late last week. The maximum speed will be raised incrementally, starting with 25 mph on April 12, followed by 30 mph on April 19; 35 mph on April 26; 40 mph on May 3; 45 mph on May 10; and 49 mph on May 17. The train speed increase on the track segment was made possible by the completion of a major track improvement project, KCS officials said in a press release.  

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