Calgary Alberta - CP today welcomed proxy advisor Glass Lewis & Co. LLC's (Glass Lewis) recommendation that KCS stockholders ABSTAIN from voting to adopt the proposed merger agreement between KCS and CN.
 
Glass Lewis also noted that with CP's revised offer, investors may see the CN/KCS and CP/KCS proposals as "effectively equal at this juncture."
 
In its recommendation issued Friday, Glass Lewis said that "KCS shareholder interests would be best served by withholding approval of the CN transaction and instead voting to adjourn the special meeting. In our view, there is little, if any reason for KCS shareholders to cast a binding vote on the CN transaction at this juncture, in the face of significant and unnecessary uncertainty that could potentially have substantial ramifications for KCS shareholders going forward, especially when much of the uncertainty should be cleared up in the coming days."
 
Describing the two merger proposals, Glass Lewis noted the "difference between the two offers has narrowed" and said "some investors may consider the CP offer currently has materially greater certainty with respect to regulatory approval, and they may reasonably be of the view that the probability/risk-adjusted values of the CN transaction and current CP proposal are effectively equal at this juncture."
 
Glass Lewis issued its recommendation after the KCS Board of Directors rightly announced yesterday a decision to adjourn the 19 Aug 2021 stockholder meeting absent a decision from the STB to "give all shareholders and the Board time to receive and consider the STB decision."
 
The Glass Lewis recommendation follows a similar move Thursday by Institutional Shareholder Services Inc., another proxy advisor, and comes two days after CP announced its 10 Aug 2021 proposal to acquire KCS, which provides a compelling, achievable, alternative to KCS shareholders.
 
Glass Lewis noted that "CN and KCS have to date not obtained such approval for the voting trust, now nearly 12 weeks after the announcement of the CN/KCS merger agreement. Meanwhile, CP obtained voting trust approval from the STB for the now terminated CP/KCS transaction on 6 May 2021, less than seven weeks after the announcement of the original CP/KCS agreement."
 
The proxy advisor states that unless proven otherwise they are "more inclined to believe the position articulated by CP regarding the likelihood of STB approval of the CN transaction better reflects the facts and available evidence known at this time than does the seemingly overly-confident view espoused by CN and KCS in support of their deal."
 
The revised ISS recommendations and today's Glass Lewis recommendation validate CP's long-standing belief that KCS stockholders should have all relevant information, including the STB decision on the CN voting trust, to be able to make an informed decision, avoid being locked into the CN/KCS deal and preserve the ability to consider a better alternative proposal.
 
CP has filed a proxy statement asking stockholders to vote AGAINST the proposed CN/KCS combination at the 19 Aug 2021 KCS stockholders meeting so that KCS stockholders are not locked into the CN/KCS deal and unable to consider other, better, options.
 
That includes CP's revised superior offer submitted to KCS on 10 Aug 2021 which we stand by.
 
A vote to ABSTAIN and vote AGAINST are essentially the same since they both withhold approval of the CN merger proposal.
 
We have urged the STB not to approve CN's proposed use of a voting trust because we believe that it would be anti-competitive and not in the public interest.
 
We believe that once the STB rules on the CN voting trust, the 10 Aug 2021 CP offer will be deemed superior as the CP/KCS combination has regulatory certainty with the STB approval for the use of a voting trust.
 
Author unknown.