Railroad News

Rail News Home Kansas City Southern 10/19/2021 Rail News: Kansas City Southern
Kansas City Southern today reported third-quarter revenue of $744 million, a 13% year-over-year increase that resulted from mix, higher fuel surcharges and the strengthening of the Mexican peso against the U.S. dollar. Third-quarter operating expenses totaled $492.1 million, including $36.5 million in merger costs. Operating income was $251.9 million and the reported operating ratio was 66.1%. Net income was $156.5 million, or $1.71 per diluted share. When adjusted for merger costs and other factors, KCS posted operating income of $288.4 million, net income of $185 million and diluted EPS of $2.02. The adjusted operating ratio was 61.2%. Overall, third-quarter carload volumes fell 3% compared to the prior year primarily due to the following commercial impacts:
• auto plant shutdowns driven by a global microchip shortage;
• service interruptions at Lazaro Cardenas due to Kansas City Southern de Mexico right-of-way blockages resulting from teachers' protests; and
• increased regulation of refined fuel product shipments into Mexico resulting in supply chain disruptions. "We are encouraged that despite several commercial headwinds, our network is performing extremely well and we are delivering near record velocity and dwell,” said President and Chief Executive Officer Patrick Ottensmeyer in a press release. "Underlying industrial demand is strong, and KCS has maintained resources to prioritize customer service as volumes return to the network." As certain supply chain disruptions are resolved and the revenue environment improves, the Class I's network will be well-positioned to handle incremental volume while continuing to provide premium service to customers, he added.

Rail News Home Kansas City Southern 10/14/2021 Rail News: Kansas City Southern
Sameh Fahmy Photo – kcsouthern.com

Kansas City Southern yesterday announced that Sameh Fahmy, executive vice president of precision scheduled railroading, will leave the company by the end of the year. 

During his tenure at the railroad, which began in January 2019, Fahmy led the company through its transformational implementation of precision scheduled railroading (PSR), KCS officials said in a news release.

Rail News Home Kansas City Southern 10/11/2021 Rail News: Kansas City Southern
Kansas City Southern announced today that it has engaged Commtrex to enhance the visibility and connectivity of its network of more than 100 transload facilities in the United States and Mexico using Commtrex's platform. The new relationship with Commtrex comes at a time of increasingly complex and volatile global supply chains, capacity constraints, labor shortages, rising transportation costs and growing trade throughout North America due to the United States-Mexico-Canada Agreement, KCS officials said in a press release. Located in 19 U.S. and Mexican states, KCS' transload facilities handle food and agricultural commodities, bulk materials, chemicals, paper and forest products, steel and other metals. The Commtrex platform enables shippers to search for transload centers by location, commodities handled, services provided and other parameters to develop their freight-rail options. Close to one-third of Commtrex’s 2,300 members are rail-served shippers.

Rail News Home Kansas City Southern 9/13/2021 Rail News: Kansas City Southern
Kansas City Southern yesterday announced that its board determined that Canadian Pacific's revised proposal constitutes a “company superior proposal” as defined in KCS’s merger agreement with CN. Under the terms of CP's proposal, each share of KCS common stock would be exchanged for 2.884 CP common shares and $90 in cash. In addition, holders of KCS preferred stock would receive $37.50 in cash for each share of KCS preferred stock held, according to a KCS press release. The proposal is binding on CP and may be accepted by KCS at any time prior to 5 p.m. EDT on Sept. 20. The transaction would be subject to approval by the stockholders of CP and KCS, receipt of regulatory approvals and other customary closing conditions. KCS has notified CN that it intends to terminate its merger agreement and enter into the definitive agreement with CP, subject to CN’s right to negotiate amendments to the merger agreement for at least five business days and the KCS board's further determination as to whether any such amendments would change the superior proposal designation. CP stands ready to execute a definitive merger agreement to create the first U.S.-Mexico-Canada railway to enhance competition in the North American rail network, CP officials said in a press release.

 "We are pleased to reach this important milestone and again pursue this once-in-a-lifetime partnership," said Keith Creel, CP's president and chief executive officer. "As we have said throughout this process, CP remains committed to everything this opportunity presents. This merger proposal provides KCS stockholders greater regulatory and value certainty. We are excited to move forward as we work toward making this perfect match a reality."

Rail News Home Kansas City Southern 9/12/2021 Rail News: Kansas City Southern
Kansas City Southern today announced that its board has determined that Canadian Pacific's revised proposal constitutes a “company superior proposal” as defined in KCS’s merger agreement with CN. The KCS board made this determination after consultation with the company's outside legal and financial advisers, according to a KCS press release. Under the terms of CP's proposal, each share of KCS common stock would be exchanged for 2.884 CP common shares and $90 in cash. In addition, holders of KCS preferred stock would receive $37.50 in cash for each share of KCS preferred stock held. The proposal is binding on CP and may be accepted by KCS at any time prior to 5 p.m. EDT on Sept. 20. The transaction would be subject to approval by the stockholders of CP and KCS, receipt of regulatory approvals and other customary closing conditions. KCS has notified CN that it intends to terminate KCS's merger agreement with CN and enter into the definitive agreement with CP, subject to CN’s right to negotiate amendments to the merger agreement for at least five business days and the KCS board's further determination as to whether any such amendments would cause the CP proposal no longer to constitute a company superior proposal. CP stands ready to execute a definitive merger agreement to create the first U.S.-Mexico-Canada railway to enhance competition in the North American rail network, CP officials said today in a press release."We are pleased to reach this important milestone and again pursue this once-in-a-lifetime partnership," said Keith Creel, CP president and chief executive officer. "As we have said throughout this process, CP remains committed to everything this opportunity presents. This merger proposal provides KCS stockholders greater regulatory and value certainty. We are excited to move forward as we work toward making this perfect match a reality."

Rail News Home Kansas City Southern 9/4/2021 Rail News: Kansas City Southern
Kansas City Southern today announced that its board has unanimously determined that the unsolicited proposal received from Canadian Pacific on Aug. 31 to acquire KCS in a cash and stock transaction valued by CP at $300 per KCS share could reasonably be expected to lead to a “company superior proposal” as defined in KCS’s merger agreement with CN. KCS intends to provide CP with nonpublic information and to engage in discussions and negotiations with CP with respect to CP’s proposal, subject in each case to the requirements of the CN merger agreement, KCS officials said in a press release. KCS remains bound by the terms of the CN merger agreement, and KCS's board has not determined that CP's proposal in fact constitutes a company superior proposal. In addition, KCS notes that there can be no assurance that the discussions with CP will result in a transaction, the press release stated. As previously announced on May 21, KCS entered into a merger agreement with CN, pursuant to which CN agreed to acquire KCS in a stock and cash transaction valued at $325 per KCS share based on the CN and KCS closing prices on May 12.

Rail News Home Kansas City Southern 8/18/2021 Rail News: Kansas City Southern
Savage today announced a partnership with Kansas City Southern to construct a multicommodity railport with transload and rail-car storage capabilities in Mossville, Louisiana. Savage will own and operate the railport, which will be built on property leased from KCS at its Mossville rail yard. Savage's Mossville facility is expected to be operational by January 2022 and will provide a link in the supply chains of Lake Charles area refineries, chemical plants and other businesses, Savage and KCS officials said in a press release. Savage has a longstanding relationship with KCS. "We've provided rail and loading services for customers in the Lake Charles area for many years, and look forward to making a difference for even more businesses in southwest Louisiana," said Savage President and Chief Executive Officer Kirk Aubry. The Mossville railport is part of the growing Savage transload network of about 50 multicommodity, rail-connected terminals across North America, and the first developed in partnership with KCS. When completed, the railport will include more than 70 transloading spots —expanded from 40 existing spots — for moving chemicals, refinery products and other materials between trucks and rail cars. It will also feature 600 spots for rail-car storage. The railport will provide access to moving products into Mexico on KCS rail lines. "The Louisiana railport will provide additional rail capacity and new services for shippers in the Mossville and Lake Charles region, which will expand their supply chain choices and allow for more competitive shipping options," said KCS President and CEO Pat Ottensmeyer.

Rail News Home Kansas City Southern 8/9/2021 Rail News: Kansas City Southern
Kansas City Southern on Saturday announced leading independent proxy advisory firm Institutional Shareholder Services Inc. (ISS) has recommended that the Class I’s shareholders vote in favor of the proposed CN merger at a special stockholders meeting to be held on Aug. 19. ISS determined the premium, valuation and strategic rationale for the transaction are compelling. While Canadian Pacific — which also aims to acquire KCS — is soliciting votes against the CN-KCS merger, it has not provided KCS shareholders with any actionable alternative or one that bridges the divide between its initial offer and CN’s offer, ISS officials claim. “In voting to approve the transaction, shareholders would lock in the break fee. They would also advance the deal one step closer to completion,” ISS officials said in a press release. KCS leaders are encouraged that ISS supports its board’s unanimous recommendation that shareholders vote in favor of the combination. “In its report, ISS validates our belief that CN is the ideal partner for KCS to power the resurgence of North America’s industrial and agricultural corridors and enhance competition, and that this transaction is in the best interest of KCS and all of our stakeholders,” said KCS President and Chief Executive Officer Patrick Ottensmeyer. “We strongly urge [our] shareholders to follow the ISS’ recommendations and vote for the transaction.”  On May 21, KCS and CN entered into a definitive merger agreement under which KCS shareholders would receive $200 in cash and 1.129 shares of CN common stock for each KCS common share. After the transaction closes, KCS shareholders would own about 12.65% of the combined company.

Rail News Home Kansas City Southern 8/2/2021 Rail News: Kansas City Southern
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.

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.

Rail News Home Kansas City Southern 7/8/2021 Rail News: Kansas City Southern
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.

Rail News Home Kansas City Southern 7/2/2021 Rail News: Kansas City Southern
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.

Rail News Home Kansas City Southern 6/25/2021 Rail News: Kansas City Southern
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.

Rail News Home Kansas City Southern 6/21/2021 Rail News: Kansas City Southern
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.

Rail News Home Kansas City Southern 6/16/2021 Rail News: Kansas City Southern
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. 

Rail News Home Kansas City Southern 6/9/2021 Rail News: Kansas City Southern
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.

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.

Rail News Home Kansas City Southern 5/14/2021 Rail News: Kansas City Southern
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.