Canadian Pacific Chief Executive Keith Creel had refused to raise his previous $25 billion for Kansas City Southern after losing to Canadian National in May, arguing that the transaction that Kansas City Southern had chosen to pursue was “not a real deal” because the Surface Transportation Board (STB), the U.S. rail regulator, would shoot it down.
But with less than 10 days to go until Kansas City Southern shareholders are asked to vote on the deal with Canadian National on Aug. 19, the STB has yet to rule on the proposed “voting trust” structure of that transaction. A voting trust insulates the acquisition target from the acquirer’s control until the STB clears the deal on a permanent basis.
Canadian Pacific had been hoping that the STB would have come out against Canadian National’s bid by now, according to people familiar with the matter. The STB did not respond to a request for comment on when it will deliver its ruling.
Another consideration behind Canadian Pacific’s u-turn was the opinion of influential proxy advisory firms, the sources said. Institutional Shareholder Services and Glass Lewis recommended that Kansas City shareholders vote in favor of the Canadian National but left the window open for them to revise their opinions if Canadian Pacific came in with a new bid.
“As Canadian Pacific went out telling (Kansas City Southern shareholders) to vote no, the feedback they got from investors was there was no other offer from you to help us make a decision,” said Cowen analyst Jason Seidl.
The acquisition of Kansas City Southern by either of its Canadian peers would create the first direct railway linking Canada, the United States and Mexico.
Canadian National Railway has said it will divest Kansas City Southern’s 70-mile rail line between New Orleans and Baton Rouge to eliminate overlap between the two railroad operators. It has agreed to pay a $1 billion fee to Kansas City Southern were the STB to shoot down their deal.
Canadian Pacific argues that Canadian National and Kansas City compete for the business of different shippers and terminals in the same region that would lose out should the merger go through. It also points out that the STB has greenlighted its voting trust structure for a deal with Kansas City Southern.
In a statement on Tuesday announcing the new Canadian Pacific bid, Creel cited U.S. President Joe Biden’s executive order on “Promoting Competition in the American Economy” as making the Canadian National deal less likely.
Biden has nominated Karen Hedlund, a former Federal Railroad Administration deputy administrator, to be a board member of the STB. U.S. lawmakers could approve her nomination in the fall, making it more likely that the STB would take a tougher stance on antitrust if it has not approved the Canadian National deal by then.
KANSAS CITY SHARES RISE
Canadian Pacific’s sweetened $300 per share offer consists of $90 in cash and 2.884 of its shares for each share of Kansas City. Canadian National’s cash-and-stock bid is currently worth around $321 per share.
Kansas City Southern shares had been trading at a wide discount to the Canadian National deal price, reflecting investor uncertainty over the transaction’s regulatory prospects. They rose 7% on Tuesday morning to $288.7, indicating that investors saw Canadian Pacific’s chances for a deal improving.
Kansas City Southern said in a statement that its board of directors will evaluate Canadian Pacific’s proposal and respond in due course. It has the power to delay the shareholder vote on the Canadian National bid, and it would scrap it altogether were it to opt for Canadian Pacific’s offer.
Canadian National said in a statement that it and Kansas City Southern were confident that their voting trust meets all the standards set by the STB and that it should be approved “after a fair and thorough review by the STB.”
Canadian Pacific said in its statement it has offered to pay back a $700 million break-up received from Kansas City Southern when it abandoned their first deal in May. It has also offered to make Kansas City Southern whole for a $700 million break-up fee it would have to pay Canadian National to abandon the latest deal.
(Reporting by Greg Roumeliotis in New YorkAdditional reporting by Abhijith Ganapavaram in Bengaluru; Editing by Aditya Soni and Steve Orlofsky)
OTTAWA – Finance Minister Chrystia Freeland says the government is making some changes to mortgage rules to help more Canadians to purchase their first home.
She says the changes will come into force in December and better reflect the housing market.
The price cap for insured mortgages will be boosted for the first time since 2012, moving to $1.5 million from $1 million, to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
On Aug. 1 eligibility for the 30-year amortization was changed to include first-time buyers purchasing a newly-built home.
Justice Minister Arif Virani is also releasing drafts for a bill of rights for renters as well as one for homebuyers, both of which the government promised five months ago.
Virani says the government intends to work with provinces to prevent practices like renovictions, where landowners evict tenants and make minimal renovations and then seek higher rents.
The government touts today’s announced measures as the “boldest mortgage reforms in decades,” and it comes after a year of criticism over high housing costs.
The Liberals have been slumping in the polls for months, including among younger adults who say not being able to afford a house is one of their key concerns.
This report by The Canadian Press was first published Sept. 16, 2024.
OTTAWA – The head of a federal inquiry into foreign interference says she will not be publicly identifying parliamentarians suspected by a spy watchdog of meddling in Canadian affairs.
The National Security and Intelligence Committee of Parliamentarians raised eyebrows earlier this year with a public version of a secret report that said some parliamentarians were “semi-witting or witting” participants in the efforts of foreign states to meddle in Canadian politics.
Although the report didn’t name individuals, the blunt findings prompted a flurry of concern that members knowingly involved in interference might still be active in politics.
As inquiry hearings resume today, commissioner Marie-Josée Hogue cautions that the allegations are based on classified information, which means the inquiry can neither make them public, nor even disclose them to the people in question.
As a result, she says, the commission of inquiry won’t be able to provide the individuals with a meaningful opportunity to defend themselves.
However, Hogue adds, the commission plans to address the allegations in the classified version of its final report and make recommendations.
This report by The Canadian Press was first published Sept. 16, 2024.
OTTAWA – The judge overseeing the sexual assault trial of former vice-admiral Haydn Edmundson is reading his decision in an Ottawa court this morning.
Edmundson was the head of the military’s personnel in 2021 when he was accused of sexually assaulting a woman while they were deployed together back in 1991.
The trial was held in February, but the verdict has been delayed twice.
The complainant, Stephanie Viau, testified at trial that she was in the navy’s lowest rank at the time of the alleged assault and Edmundson was an officer.
Edmundson pleaded not guilty, and testified that he never had sexual contact with Viau.
He was one of several high-ranking military leaders accused of sexual misconduct in 2021, a scandal that led to an external report calling for sweeping changes to reform the culture of the Armed Forces.
This report by The Canadian Press was first published Sept. 16, 2024
