CN’s $33.7 Billion Bid for Kansas City Southern

Torys and Cravath are acting for CN in connection with its proposal to combine with Kansas City Southern. Simpson Thacher represented JPMorgan Chase Bank, N.A., Royal Bank of Canada and RBC Capital Markets.

On April 20, 2021, CN announced that it made a superior proposal to combine with Kansas City Southern in a cash-and-stock transaction with an total implied enterprise value of US$33.7 billion, or US$325 per share, including the assumption of approximately US$3.8 billion of KCS debt.

The offer tops a proposal made by Canadian Pacific Railway for KCS last month, one that offered $275 a share for a total price tag of $25 billion.

The combination would create a premier railway for the 21st century, seamlessly connecting ports and rails in the United States, Mexico and Canada and providing superior service, enhanced competition and new market access to move goods across North America efficiently and safely.

Under the terms of the proposal made to KCS’ Board of Directors, following closing into a voting trust, KCS shareholders would receive US$200 in cash and 1.059 shares of CN common stock for each KCS common share. The cash portion of the consideration would be funded through a combination of cash-on-hand and approximately US$19.3 billion of new debt.

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. As the only railroad connecting Canada’s Eastern and Western coasts with the U.S. South through a 19,500-mile rail network, CN and its affiliates have been contributing to community prosperity and sustainable trade since 1919.

KCS is a transportation holding company that has railroad investments in the U.S., Mexico and Panama. Its primary U.S. holding is The Kansas City Southern Railway Company, serving the central and south central U.S. Its international holdings include Kansas City Southern de Mexico, S.A. de C.V., serving northeastern and central Mexico and the port cities of Lázaro Cárdenas, Tampico and Veracruz, and a 50 percent interest in Panama Canal Railway Company, providing ocean-to-ocean freight and passenger service along the Panama Canal.

The Torys’ team included Robert Prichard (Picture), Michael Amm, Phil Symmonds, Jared Fontaine and Daniel Masliyah (corporate/M&A).

The Cravath team is led by partners Robert I. Townsend III, Damien R. Zoubek and Jenny Hochenberg and includes associates Sanjay Murti, Eric S. Goodwin and Jerome C. Newton on M&A matters; partners Craig F. Arcella and Stephen M. Kessing, senior attorney Sarah F. Rosen and associates D. Ana Choi and Caroline H. Gieryn on financing matters; partner Lauren Angelilli and associate Richard Bohm on tax matters; partners Jonathan J. Katz and Matthew J. Bobby and associates Jana I. Hymowitz and Anna Mikaelyan on executive compensation and benefits matters; and partner Christine A. Varney and associate Kolja I. Ortmann on regulatory matters. Evan S. Gabor also worked on M&A matters and Alissa B. Fromkin worked on tax matters.

Simpson Thacher represented JPMorgan Chase Bank, N.A., Royal Bank of Canada and RBC Capital Markets in connection with a bridge term loan facility of up to $19.3 billion for Canadian National Railway Co., with Patrick Ryan, Adam Moss and Heather Lee (Banking and Credit); David Azarkh and Catherine Ciriello (Capital Markets); Patrick Naughton (M&A); Benjamin Rippeon and Brian Mendick (Tax); Larry Moss, Jennifer Neilsson and Ashlie Lawton (Executive Compensation and Employee Benefits); Genevieve Dorment and Kate Mirino (IP); and Michael Isby and Timothy Mulvihill (Environmental).

Involved fees earner: Lauren Angelilli – Cravath Swaine & Moore; Craig Arcella – Cravath Swaine & Moore; Matthew Bobby – Cravath Swaine & Moore; Richard Bohm – Cravath Swaine & Moore; Ana Choi – Cravath Swaine & Moore; Alissa Fromkin – Cravath Swaine & Moore; Evan Gabor – Cravath Swaine & Moore; Caroline Gieryn – Cravath Swaine & Moore; Eric Goodwin – Cravath Swaine & Moore; Jenny Hochenberg – Cravath Swaine & Moore; Jana Hymowitz – Cravath Swaine & Moore; Jonathan J. Katz – Cravath Swaine & Moore; Stephen Kessing – Cravath Swaine & Moore; Anna Mikaelyan – Cravath Swaine & Moore; Sanjay Murti – Cravath Swaine & Moore; Jerome Newton – Cravath Swaine & Moore; Kolja Ortmann – Cravath Swaine & Moore; Sarah Rosen – Cravath Swaine & Moore; Robert Townsend III – Cravath Swaine & Moore; Christine Varney – Cravath Swaine & Moore; Damien Zoubek – Cravath Swaine & Moore; Benjamin Rippeon – Gibson Dunn & Crutcher; David Azarkh – Simpson Thacher & Bartlett; Catherine Ciriello – Simpson Thacher & Bartlett; Genevieve Dorment – Simpson Thacher & Bartlett; Michael Isby – Simpson Thacher & Bartlett; Ashlie Lawton – Simpson Thacher & Bartlett; Heather Lee – Simpson Thacher & Bartlett; Brian Mendick – Simpson Thacher & Bartlett; Kate Mirino – Simpson Thacher & Bartlett; Laurence Moss – Simpson Thacher & Bartlett; Adam Moss – Simpson Thacher & Bartlett; Timothy Mulvihill – Simpson Thacher & Bartlett; Patrick Naughton – Simpson Thacher & Bartlett; Michael Amm – Torys LLP; Jared Fontaine – Torys LLP; Daniel Masliyah – Torys LLP; Robert Prichard – Torys LLP; Philip Symmonds – Torys LLP;

Law Firms: Cravath Swaine & Moore; Gibson Dunn & Crutcher; Simpson Thacher & Bartlett; Torys LLP;

Clients: Canadian National Railway Company; JP Morgan Chase & Co.; RBC Capital Markets; Royal Bank of Canada;

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Martina Bellini

Author: Martina Bellini